This morning’s Case Shiller housing data showed continued stabilizing in national real estate. As I’ve mentioned previously, I don’t see an “event” bottom occurring here, but rather a post-bubble “workout” period. It would be highly unusual for a post-bubble price decline to experience a sharp and dramatic v-shaped recovery. Generally, these environments are consistent with long periods of working off excess inventory and flattish price action as buyers digest lower prices and inventory. I believe that’s the most likely scenario here. The bottom line for me is, house prices don’t have huge downside here, but also won’t experience a huge price increase in the coming years. Stagnant is likely the best word to describe prices…..But hey, that’s better than declines I guess.
Here are some details from S&P:
“With May’s data, we saw a continuing trend of rising home prices for the spring,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “On a monthly basis, all 20 cities and both Composites posted positive returns and 17 of those cities saw those rates of change increase compared to what was observed for April. Seventeen of the 20 cities and both Composites also saw improved annual rates of return. We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns; however, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall.
“The 10- and 20-City Composites were each up 2.2% for the month and recorded respective annual rates of decline of 1.0% and 0.7%, compared to May 2011. While still negative, these annual changes are the best we’ve since in at least 18 months.