Home Prices Rise and Fall, Trying to Find Bottom
Zillow says home prices declined in the first quarter of 2010 by 1 percent quarter-over-quarter and fell 3.8 percent year-over-year. Integrated Asset Services (IAS) sees a rosier picture with national housing prices gaining 1.1 percent in March. The National Association of Realtors (NAR) found 91 out of 152 areas posted gains in median home prices.
Who's right? Well actually all of them.
Zillow looks backward to develop its report, which is based on home closings: In other words, what it can find in the public records, which tend to lag a couple of months after closing.
IAS develops its data based on pending transactions from its mortgage data base, so these sales may or may not be closed, giving IAS a chance to see further into the future.
For future trends IAS data is more accurate than Zillow. The NAR develops its data from closed sales, but does have access to those numbers earlier than Zillow.
So it appears house prices are stabilizing in many markets, while increasing in some and decreasing in others. To put it another way, we're gradually getting back to the old rule of real estate -- each local market has its own trend.
Zillow's Chief Economist Dr. Stan Humphries expressed concern for the summer sales season: "We suspect that the homebuyer tax credits are, for the most part, stealing demand from later this summer, rather than creating new demand." He believes that now that the tax credit has expired (contracts had to be signed by April 30), we'll see inventory levels rise and home prices decline.
Dave McCarthy, President and CEO of IAS also sees a possibility of a decline after all the tax credit sales are closed (which will happen by June). He said, "We can't say for certain how much the federal support programs actually helped, but we do know housing demand will fall back a bit with their expiration." He's also concerned about the "growing number of foreclosed homes adding to supply." He added that, "I'm afraid the combination of these factors could pressure home prices in neighborhoods around the country for years."
Zillow predicts that national home prices will reach bottom in the third quarter of 2010. "When we do get there," Humphries added, "we expect the high rates of negative equity and foreclosures to keep national home value appreciation near zero for some time, possibly as long as five years."
How do you make a decision about home buying? If you're planning to stay in the home for five years or more, now is a good time to start looking for a good deal at or near the bottom. You can never tell when a market will turn. For example, Akron, Ohio, saw foreclosed properties selling as low as $5,000 to $20,000, with a median home price of $50,000 in the first quarter of 2009. That median price jumped to $95,000 in March of this year.
Zillow thinks several large California markets -- Los Angeles, San Diego, San Francisco, Santa Barbara and Ventura -- have stabilized significantly in the past year and may be marking a bottom. NAR says distressed sales continue to depress prices in Florida and Nevada cities with Orlando taking the biggest hit: median prices were down by 15 percent.
Now that real estate appears to be returning to form -- with local trends driving home sales, rather than the state of the national economy -- you'll need to do your research. Start talking to local real estate professionals and reading local new to see what is truly happening in your area or in an area where you plan to move.
Lita Epstein has written more than 25 books, including "The 250 Questions Everyone Should Ask About Buying Foreclosures."