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A Rebound in Home Prices: Good News or Something Less



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By : Richard Ray    99 or more times read
Is four months enough of a trend to indicate we are coming out of a home sales slump of epic proportions? There is tentative good news to be had in many metro areas that saw housing prices improve as much as 3% in August, but it may not tell the whole story. In fact the best housing news is found away from the metro landscape.

CNNMoney.com indicates the concerted effort to keep homeowners in their homes along with unprecedented government spending on bank bailouts may be at least partially responsible for the improvement, but the rebound may be prone to a negatively viewed reversal on its own.

This report suggests, “Prices continued to slide in areas that have been hit hard by foreclosures. Prices dropped 0.5% in Cleveland and 0.3% in Las Vegas during August.”

“Stabilization” is a word that can be used to describe the four-month trend, but that stability is dependent on factors that will not always be present. Most notable is remarkably low interest rates and government assistance in trying to keep potential home foreclosures from occurring.

Ian Shepherdson, chief U.S. economist at High Frequency Economics warned CNNMOney.com that the improvement in home prices could also be hindered by a "wall of supply" coming to market this spring from private sellers and foreclosures.

In other words the gains reported during this four-month period could be negated rather quickly. Only 41 of the 381 housing markets in the report are expected to see stability or improvement over the next year. This leaves more than 300 markets with a continued potential for decline.

The CNNMoney.com report cites experts as predicting an 11% decline in housing prices by the middle of 2010. This may provide some positive news if you are a buyer, but a dismal prospect if you find yourself with a need to sell.

Meanwhile some communities are discovering that a strong local economy has had a positive effect on their ability to retain residents and provide citizens with a recession resistant environment. CNNMoney.com lists the following as the top ten best small towns to live in.

1. Louisville, CO

2. Chanhassen, MN

3. Papillion, NE

4. Middleton, WI

5. Milton, MA

6. Warren, NJ

7. Keller, TX

8. Peachtree City, GA

9. Lake St. Louis, MO

10. Mukilteo, WA

This list factored in things like, “Great schools, affordable homes, low crime,” along with a robust local economy.

All of this data should be taken into consideration as interest rates are beginning to climb again; mortgage applications move in the opposite direction and first time homebuyer credits are drawing to a close (November 30th).

New housing starts continue to decline and areas scheduled for development two years ago are now often covered in weeds. They may contain one or two houses and abundant infrastructure, but little else.

If there were some positive news we can glean from current data it would be that much of the Midwest has escaped the worst of the economic recession. Most data seems to point to metro areas are the most problematic. CNNMoney.com suggests that Illinois is generally a bright spot economically except for Chicago where housing prices dropped slightly more than 25%.

This is not an exceptionally bad time for those who either rent or live in rural America, but for larger urban areas the recovery may take a bit longer to materialize.
Richard Ray, author of this article writes for the Householders Guide where you can find up to date Real Estate News and Household Information.

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