Analysts hopeful of recovery in US property market
AFTER a plunge lasting three years, houses have finally become cheap enough to lure buyers. That, in turn, is stabilising prices, generating hope that the real estate market is beginning to recover.
Eight cities, including Chicago, Cleveland, Denver and San Francisco, showed price increases in May, up from four in April and one in March, according to data released Tuesday. Two others, Charlotte and New York, were flat. For the first time since early 2007, a composite index of 20 major cities was virtually flat, instead of down.
"We have found the bottom," said Mr Mark Fleming, chief economist for data firm First American CoreLogic.
The release of the surprisingly strong Case-Shiller Price Index, the most widely watched source of price information about the housing market, followed earlier reports that sales of existing homes rose last month for the third consecutive time, while sales of new homes rose in June by the largest percentage in eight years.
All of these improvements are tentative, and come after a relentless decline that knocked more than half the value off houses in the worst-hit cities.
Some sceptics say they believe the market is merely pausing before it resumes falling and that much of the life in the market is coming from speculators. Even the most enthusiastic analysts acknowledge that rising unemployment, another leap in foreclosures or a significant jump in interest rates could snuff out progress.
Still, hope is growing in some quarters. "Recession is over, economy is recovering - let's look forward and stop the backward-looking focus," Wells Fargo chief economist John E Silvia wrote on Tuesday in a research note.
A few weeks ago, Mr Kirit Shah, 64, a retired forensic chemist for the New York Police Department, closed on a house in Royal Palm Beach, Florida. "I'm on a lakefront. I never dreamed I would be on a lakefront."
But the thing he likes best is this: He paid US$260,000 ($375,000) for the five-bedroom house, half of what that model was fetching during the boom. "An excellent deal," he said. "Plus I got a good rate on my mortgage, under 5 per cent."
But if Mr Shah was one reason new home sales were up 11 per cent in June from May, it is unclear just how many others like him are out there.
Mr Brad Hunter, chief economist for research firm Metrostudy, said the new home numbers appeared to illustrate less a return of buyers like Mr Shah and more a resurgence of investors and speculators.
Metrostudy's own data showed that the number of buyers during the second quarter who actually moved into their new house declined 2.6 per cent.
"Investors are turning right around and putting the houses on the market for sale or for rent," Mr Hunter said.
"What appears to have been an absorption of excess inventory can be just a changing of ownership of that inventory."
One reason the market is perking up in some places, real estate agents say, is the encouragement offered by such measures as the first-time buyer's tax credit of US$8,000. Another reason is the prevalence of foreclosures, which make up about a third of all existing home sales. In some troubled regions, agents say they cannot remember the last transaction that did not involve a bank disposing of a property.
These communities are not yet showing any improvement in prices. Las Vegas was the worst-performing city in the May Case-Shiller index, falling 2.6 per cent. Prices have fallen there by a third in the last year. THE NEW YORK TIMES
Source: Today, 30 July 2009