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Published: August 25, 2009
This can go in the “good news” file, sort of:
The rate of U.S. home price decline definitely stopped
accelerating in the second quarter. That’s the word from the
June edition of the S&P/Case-Shiller Home Price Index.
National home prices registered a -14.9% decline from the second
quarter of 2008 to the same time in 2009. While that’s hardly
worth celebrating, it’s way better then the record -19.1%
year-over-year fall in the first quarter.
As the chart shows, it ain’t as bad as it used to be. But at the
same time, home prices are still at early 2003 levels. You could
call this a housing rebound, but it’s more like a deceleration.
“It’s an impressive turnaround. This is a huge, sudden upward
swing,” says Robert Shiller, whose namesake is attached to this
index. “I think it might mark a change in trend.
“But I didn’t say we’ve reached a
bottom. It’s just suggestive of a
turning point. We’ve seen other
corrections like this reverse. We
really don’t know the future….
“Our UMM [one of Shiller’s tradable
housing market securities] is still
not predicting any major increases
going out five years. It’s
predicting now that in five years,
home prices will be +6% higher than
they are now. That is not a huge
recovery.”
What’s more, the “cure rate” on
ailing mortgages is plummeting.
According to a Fitch study released
today, between 2000-2006, an average
45% of prime mortgage holders who
fell behind on a monthly payment
were able to catch back up the next
month.
In July, that “cure rate” was 6%. We
reiterate, that was for the best,
prime-level borrowers. Alt-As went
from an average 30% to 4%. Subprimes
shrank from 19% to 5%.
“Cure rates have really collapsed,”
commented Roelof Slump, Fitch’s
managing director. Yeah, that’s safe
to say. Not only does this give us
pause in celebrating a housing
comeback, but it reinforces a trend
we’ve been pounding the table about
over the last month or so: This
isn’t about subprime anymore.
For further proof, check this out…
some of the fine print from last
week’s existing home sales data:
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The NAR boasted a +7.2% leap in
existing home sales for July last
week, the biggest month-to-month
gain since they started keeping
track. But with the overwhelming
majority coming from foreclosures,
distressed sales and the lowest of
the low end… what does it really say
about the true state of U.S.
housing?
-- Ian Mathias
Managing
Editor
AgoraFinancial.com Editor's Note: This
article originally appeared in
Daily Reckoning. |
