Housing prices of 20 cities were flat from July to August, according to the latest S&P/Case-Shiller housing index. Year-over-year and on a seasonally adjusted basis, the composite 20 index was down 3.8% from August of last year. That’s a slowdown from the previous year-over-year drops of 4.1% in July and 4.6% in June.
From that viewpoint, it looks like the tumble in housing prices might be slowing. The 20-City composite appears to have bottomed out in March. The 3.8% year-over-year drop, though, was worse than consensus expectations, which were projecting a decline of 3.5%. In other words, the outlook is slightly better, but not slightly better enough.
A peek at the regional data indicates that Washington, D.C., and Detroit — which showed year-over-year increases in last month’s data — continue to recover. Washington was up 1% from last month, with a one-year change of 0.3%. Detroit was up 2.7% year-over-year, although the change from July was a 0.1% drop.
The other 18 cities in the index show declines. Phoenix (down 0.8% from last month and down 7.7% from last year), Atlanta (down 1.7% from the previous month and down 6.3% from last year), Tampa (down 0.3% from last month and down 5.8% from last year) and Seattle (down 0.5% and down 6.1% respectively) continue to get hammered. Homebuyers in Vegas clearly placed their money on red, with the city down 0.9% from a month ago and down 5.8% from a year ago. That marks a new low for the city’s housing prices as tracked by the index, down 59.5% from their peak five years ago.
What’s more troubling is that we’ve recently seen record low mortgage rates. Econ 101 tells us that if rates drop, prices should rise. The fact that we can’t do any better than these mild signals of recovery even as we inject the market with a steroid of cheaper money shows that something in the housing market is still fundamentally broken. Is it unemployment, lack of credit, or lack of consumer confidence? Possbily all three.
Lack of recovery means that millions of homeowners are still “underwater” — owing more on their homes than their homes are worth. The original program to help these homeowners modify their mortgages, meant to help 3 to 4 million homeowners when it was launched two years ago, ended up reaching less than 1 million.
In an effort to address the situation, President Obama on Monday announced new changes to HARP — the Home Affordable Refinance Program. The big change is that homeowners who are deep underwater — with their mortgages more than 125% of their home’s current value — may now be eligible for refinancing. Will that work? It’s too early to tell. Full program guidelines, including cost of refinancing, are set to roll out Nov. 15.