Diana Olick of CNBC has been all over the real estate market over the last few years and remains one of the great unbiased resources in the world of financial news. She simply tells it like it is. And what she sees is not so pretty, however, the recent housing reports are irrelevant according to her:
- Clear Capital: Home prices fell 5.9 percent in past two months through 10/22
- CoreLogic: Home prices fell 1.5 percent year-over-year in August
- Natl. Assoc. of Realtors: Home Prices fell 2.2 percent year-over-year in September
- S&P/Case-Shiller: Home prices rose 1.7 percent in the top 20 markets year-over-year in August, but with gains “decelerating”
- FHFA: Home prices on homes with Fannie/Freddie loans fell 2.4 percent year-over-year in August
“Three out of five of these reports are for August, when the bulk of the home buyer tax credit was over, but the closing deadline was then extended to Sept. 30th.
One of them, the S&P/Case-Shiller, is a running average, so it goes even further back than August. One claims to be the most recent data, Clear Capital, and is the biggest drop, so you could suspect that’s the tax credit hangover.Then the NAR report, which measures September, so still under the influence of those last minute tax credit laggards, is somewhere in the middle but showing prices declining year-over-year for the first time in several months.”
The conclusion? Ignore the latest reports, good or bad. The most important reports are dead ahead of us and simple common sense says that the one real-time report we saw in recent days (Clear Capital) is likely to be the one that most closely represents our impending reality of lower home prices:
“First of all, fall/winter is the slowest season in housing, and prices reflect that. Of course there are all those “seasonal adjustments,” but with so much demand pulled forward by the tax credit, and foreclosure/mortgage issues plaguing what scintilla of buyer confidence remained in the market, sales are likely to take a deep hit again.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.