The Bottom for House Prices & Housing Bottom Callers

The Bottom for House Prices

by CalculatedRisk on 4/25/2012 

First a comment: Back in February, I argued that The Housing Bottom is Here. My previous house price call was back in December 2010, and at that time I thought we’d see another 5% to 10% decline on the repeat sales indexes. Corelogic is down 7.3% since October 2010, and the Case-Shiller composites indexes (NSA) are down about 7.6% (both will probably fall further with the March report). About what I expected.

Here are some more bottom calls (or close to bottom calls). Most of the following analysts and economists haven’t called a bottom before – so this isn’t the usual annual “Rite of Spring” bottom calls, but we have to be careful about an echo chamber since we all look at the similar data. Also these are just forecasts …

From John Gittelsohn and Prashant Gopal at Bloomberg: Housing Declared Bottoming in U.S.

Economists including Bank of Tokyo-Mitsubishi UFJ’s Chris Rupkey, Bank of America Corp.’s Michelle Meyer and Mark Fleming of CoreLogic Inc. are also predicting prices are close to a trough after a 35 percent slump from a July 2006 peak, even as the threat of more foreclosures loom to boost supply.

Meyer, senior economist with Bank of America in New York, said the recovery will be led by the parts of the country with fewer foreclosures and more job growth. She estimates that U.S. prices will reach bottom this year and stay little changed until 2014, when they may gain about 2.5 percent.

“It’s just a matter of months before we get positive year- over-year numbers in the overall index,” Fleming said in a telephone interview from Washington. “Our data lags the reality. The turnaround is happening in the March, April and May time frame.”

The article also has some more bearish comments including some from Robert Shiller.

From Zillow: U.S. Home Values Post Largest Monthly Gain Since 2006; Majority of Markets Covered by Zillow Home Value Forecast To Hit Bottom by Late 2012

Home values in the United States increased, rising 0.5 percent from February to March, according to Zillow’s first quarter Real Estate Market Reports. This marks the largest monthly increase in the Zillow Home Value Index (ZHVI) since May 2006, when home values also rose 0.5 percent.

Nationally, the Zillow Home Value Forecast shows that home values will fall 0.4 percent over the next 12 months, with many months showing no change or slight appreciation late this year, suggesting that U.S. home values could reach a bottom in late 2012.

“For people who have been waiting to time their home purchase close to market bottom, it’s time to start shopping,” said Zillow Chief Economist Dr. Stan Humphries. “When the bottom will hit will vary by market, and it’s nearly impossible to time a purchase exactly right.”

And NDD at the Bonddad Blog has a summary of recent dataHousing overview part 2: pricesAnd finally, a well known private forecasting group (that I can’t name) put a research note this morning, based on their own surveys, saying that house prices have probably found a bottom.

Housing Bottom Callers: Zelman, Thornberg

by CalculatedRisk on 4/25/2012 

This is not an appeal to authority – house prices don’t care who calls a bottom – but earlier this morning I mentioned a few former housing bears who now think prices are at or very near a bottom. Here is another article with comments from Ivy Zelman and Christopher Thornberg; two of the biggest housing bears at one point …

From Alejandro Lazo at the LA Times: Housing market may be on rebound at last. A couple of excerpts:

“What are important are sales and inventory, and those are pointing in the right direction,” said Christopher Thornberg, a principal at Beacon Economics who was one of the early callers of the housing crash. “I would say that by the end of the year, they should translate into better prices.”

Thornberg added, “The recovery is here.”

“This is not a robust recovery, but I feel confident that we are not sitting here lingering,” said [Ivy Zelman, chief executive of Zelman & Associates], who predicts that home prices will end the year up about 1%. “There really is more meat to the bone.”

“The foreclosure market is turning into a drought, not a wave, and that has resulted in a lack of inventory,” said Sean O’Toole, chief executive of the firm “If it continues, it will likely mean that we’ve either seen a bottom — or have passed a bottom — in prices because of limited supply and still strong demand.”

Ivy Zelman, formerly at Credit Suisse, became an internet favorite when she asked Toll Brothers CEO Bob Toll “Which Kool-aid are you drinking?” on the Q4 2006 Toll Brothers conference call.

A couple of key points:
• None of these former housing bears see prices rising significantly any time soon.

• However if prices do stop falling that would impact psychology. Many homeowners with a little negative equity would start feeling that they can work their out from under their debt, and I’d expect delinquencies to fall further. And some potential buyers would start feeling a little more confident about buying. If sellers feel prices will increase a little, some will wait for the “better market”, and that will keep inventory down. And lenders will start becoming more confident too. Prices do not have to increase to change psychology, just stop falling!

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