Amid glimmers of a housing recovery, home prices continue to cast a pall over the real estate market.
Even with a rise in home sales and new construction, traditional indexes tell us that home prices continue to slide, suggesting that the housing market still hasn't truly hit bottom. But other evidence suggests the opposite.
At least two indices designed to provide a more up-to-date picture of home prices than traditional indices show that home prices have actually increased over the last three months.
"Builders build when they expect prices are going to rise" and, according to the Trulia Price Monitor, they seem to have been on the mark with that forecast, Trulia's chief economist, Jed Kolko, says.
Wayne Yamano, vice president of John Burns Real Estate Consulting, which created the Burns Home Value Index, told DSNews.com that his company's price index also shows that "the slow housing market recovery is underway," though he cautioned that prices could drop below January lows again.
So how is it that these indices' findings appear to fly in the face of those of their more prestigious peers? The reason is that traditional home-price indices reflect months-old price movements, not real-time ones.
That's because they track sales prices, which aren't established until about two months after homebuyers and sellers sign home-purchase contracts.
On top of the two-month lag, traditional indices, which include the FHFA Price Index, S&P/Case-Shiller Index and the CoreLogic Home Price Index, take at least four weeks to report sales prices after home-sales data become available. That means that traditional indices usually capture price trends in the market that occurred three or more months before.
The Trulia Price Monitor and Burns Home Value indices, the first of which is brand new, attempt to gauge real-time price trends by using home prices set at or prior to the beginning of home purchase transactions, not at their conclusion.
Trulia, which is a real estate information and listings service website, leverages its database of listings to accomplish this goal by, first, tracking the most-recent asking prices on listed properties. It then adjusts those prices for changes in the mix of properties, in order to show price trends for similar homes in similar neighborhoods.
The Burns Home Value Index also claims to calculate month-over-month home-price movements by crunching data on the prices of homes when they enter into contract. According to DSNews.com, that entails using MLS, another listing service, as well as other market indicators. The metric also uses an 'electronic appraisal' of every home in the market, "rather than just the small sample of homes that are actually transacting," vice president of John Burns Real Estate Consulting, Wayne Yamano, told DSNews.com.
Such indices are the "best chance we have to understand what's going on in the market right now," Kolko says. But he added that traditional indices remain valuable. "Historically, sales index prices are the best guide," he says, because many homes that enter into contract do not always end in a sale. In fact, contingencies written into contracts have sunk a higher percentage of home deals in recent years than in the previous housing era.
The discrepancy between contract signings and closings is one reason why legacy indices may show different price movements when they eventually do reflect market conditions of the first quarter of 2012, which the newer indices have already hit on.
"Keep in mind, they're not closing yet," Sam Khater says of home-sale contract signings. "They could fall out for a number of reasons." Khater is senior economist at CoreLogic, which releases a legacy index, the CoreLogic Home Price Index.
The CoreLogic Home Price index recently showed a 0.8 month-over-month decrease in February 2012, which more or less reflects a decrease in asking prices that occurred around December.
Foreclosure sales also could impact the accuracy of the new-generation indexes, according to Sam Khater. "A majority of REOs are unlisted," Khater says. "Sometimes they [banks] auction them; sometimes they sell in bulk" to investors. Sales of REOS, which are foreclosed homes usually owned by banks, typically sell at below-market prices to buyers who pay in cash.
But Kolko says that the Trulia Price Monitor actually is able to factor in foreclosure sales activity by using data from Realtytrac.com, an online foreclosure marketplace. John Burns Real Estate Consulting could not be reached for comment on their approach to accounting for REO sales.
Khater says that it's quite plausible that the indices are on point, and that home prices genuinely are increasing. "The fact that it's up over the last quarter doesn't surprise me," he says.
But even if traditional indices do confirm the price appreciation found by the Trulia Price Monitor and Burns Home Value Index, which Kolko says he expects to happen in July data releases, many experts say the market is by no means healthy.
Situated around a small but beloved pocket park, this Long Beach community of about 22,000 is catching the hearts of artists, musicians, and young couples, some of whom migrate about 25 miles south from Los Angeles for its character-filled Craftsman bungalows and Spanish Revivals, as well as its proximity to the coast. The neighborhood developed in the early 20th century, when second-generation British and Scandinavian immigrants, who worked in commerce, the shipyards and the oil fields, purchased individual lots to build modest, largely two-bedroom houses. Nowadays, it's a hipper, expanded version of Mayberry, a place where locals gather in the park for picnics or yoga classes, and where impromptu concerts might break out on porches on summer nights. Rose Park is also adjacent to Retro Row, a three-block commercial strip that's home to pubs, shops, and a restored 1920s Art Deco movie house.
The oldest are Victorian-era cottages, but the most ubiquitous are Craftsman bungalows, all the rage between 1910 and 1922, when the neighborhood saw its boom. Later styles include Spanish Revival and Mission Revival. The average price is around $350,000 to $450,000.
Why Buy Here?
The 2008 restoration of the neighborhood's namesake park has given new life to this area, notably in an annual bluegrass festival that draws thousands. And if you're a DIY novice, The Rose Park Neighborhood Association hosts an annual Restoration Trade Fair each summer, when dozens of craftspeople and contractors advise visitors and attendees on the best practices for restoring their old houses.
"I have wild strawberries all over my backyard -- and, yes, it's kind of cool," says Carole Diehl of the aptly named Kansas City neighborhood she and her husband have called home for the past 21 years. During that time, Diehl, who serves as president of the neighborhood association, has seen a lot of changes in Strawberry Hill, which is situated on a bluff overlooking the confluence of the Kansas and Missouri rivers. The town's citizens—many of them descendants of 19th-century Eastern European immigrants who moved here to work in the city's meatpacking industry—today make room for young artists and young families drawn to the affordable houses and the restaurants, shops, and pubs opening up on Fifth Street, the neighborhood's main commercial drag.
Strawberry Hill retains many of its original, brick workers' cottages and wood bungalows. Most are located on 25-foot-wide lots, include two or three bedrooms, and average around 1,000 square feet. The neighborhood's larger two-story Victorian-era houses are much sought after by newcomers. A three-bedroom 1932 bungalow was recently on the market for just under $50,000, while a 1,554-square-foot Folk Victorian was going for around $80,000.
Why Buy Here?
Strawberry Hill remains an affordable (and increasingly hip) option for first-time homebuyers. Fifth Street recently underwent a thoughtful makeover, including old-fashioned streetlights and brick sidewalks, promising this reemerging commercial district will continue to bustle in the future.
Though he hails from the United Kingdom, Dan Bookham feels right at home in the small coastal town of Rockland, Maine. "Around here, the motto is: ‘We don't care who your father was. Show us what your kids can do,' " says Bookham, who bought a house here three years ago with his wife, Jessie. Good public schools and safe streets make the town of about 7,300 an ideal place to raise their 4-year-old daughter; and great restaurants, seafood markets and museums make it pretty great for the Dan and Jessie, too.
Shipbuilding, and then mills and factories (in particular, lime production) supported the populace here for centuries, leaving a legacy of Victorian cottages as well as Craftsman bungalows and Folk Victorians that abound in the downtown area. On the town's south end, former workers' cottages, in the Cape Cod style, can be had for around $100,000, while larger houses on the north end, built by wealthy sea captains, command higher prices. Most houses have large backyards, which locals take advantage of by planting elaborate flower and vegetable gardens.
Why Buy Here?
In the past couple of decades, Rockland has shaken its image as an insular commercial fishing community by redefining itself as a popular tourist destination that's also attracting full-time residents. It's home to the North American Blues Festival in July and the Maine Lobster Festival each August. Rockland is the location of the Farnsworth Art Museum, which boasts more than 10,000 paintings by American masters, including Maine's own, the Wyeths: Andrew, N.C., and Jamie. There are also plenty of sailing, hiking and skiing opportunities.
Encompassing 30 blocks of hardscrabble North Minneapolis, this Victorian-era enclave is the kind of place where people fall in love first with a house, then with the neighborhood. "This area has always been stigmatized as a rough part of town, so it wasn't on my radar," says resident Amy Narum, who moved into her partner Mary's 1904 duplex a few years ago. "But I quickly realized that people here are really friendly and really close." The area, named for its location high above the city's Bassett Creek and Oak Lake, was largely developed during the 1880s, when architects designed residences for well-to-do merchants operating businesses along its main thoroughfares of Washington, Plymouth and West Broadway. Middle-class migration to newer suburbs, combined with absentee landlords, put the neighborhood on the decline by the 1970s. But residents fought back, forming a neighborhood association that's the basis of the tight-knit community.
Most are 2,500- to 3,000-square-foot Queen Annes, Prairie-styles, and Craftsmans constructed from the late 1800s to early 1900s. While prices for restored houses were reaching the $300,000 range during the housing boom, you can now get one for as little as $150,000, while fixer-uppers can be had for as little as $40,000.
Why Buy Here?
Absentee landlords who'd scooped up properties in Old Highland during the real-estate boom are largely out of the picture, resulting in housing stock that's well-priced, lived in by locals and much better maintained than it was before. Because of the low prices, many homeowners here are purchasing properties on their own blocks and restoring them for use as rentals.
This subdivision of "futuristic" luxury housing, designed by the architectural firm of Palmer & Krisel, was the first planned residential community in Las Vegas. "They were ‘Jetsons' houses," says Jack LeVine, a Realtor and midcentury modern specialist. Today, entertainers, teachers and professionals enjoy Paradise Palms' central location between Las Vegas' Boulevard indoor mall and National Golf Course, 2 1/2 miles from the Strip. "It was built starting in 1962. By Vegas standards, that's ancient," says Clay Heximer, a resident for two years.
For $50,000, fans of the Desert Modern look can snag a 2,000-square-foot fixer-upper or, for $400,000, find a pristine vintage house on the golf course, though prices range between $80,000 and $150,000. "The most original are the most sought-after and retain their resale value the best," LeVine says. William Krisel, who, at 87, now consults on true restorations of his firm's houses, agrees: "People contact me to remove bad additions and reduce square footage, and it pays off." Some of the houses' single-level plans make them nice for retirees, too.
Why Buy Here?
Prices have hit bottom. The neighborhood fell to renters after 1985, when owners moved out for newer construction, and since 2008, Las Vegas has waged a citywide struggle to keep squatters and parts-strippers out of homes vacated due to foreclosures. Now the tide is turning back to owner-occupied properties. Neighbors organize monthly cocktail parties that segue into education sessions on midcentury modern. Plans are afoot to add a park. "We're taking care of graffiti and working hard to keep out crime," Heximer says. In Paradise Palms, it's a citizen-led response that signals a revitalized community.
The residents of the Van Wyck Brooks neighborhood sure know how to entertain at home. From progressive dinners to black-tie parties to after-work cocktails, someone's always hosting something around here. But why wouldn't they want to show off their houses? Most were built by turn-of-the-century financiers and businessmen who migrated here following the establishment of railroad lines between Plainfield and New York City in the mid-1800s. They outfitted their suburban palaces with elaborate staircases, Citizen Kane–like oversize mantels, stained-glass windows, and millwork carved from exotic hardwoods. Named after Pulitzer Prize–winning writer Van Wyck Brooks, who grew up here, the entire neighborhood is listed on the National Register of Historic Places.
The most exquisite are enormous Second Empire and Queen Anne homes with wraparound porches, turrets, and elegantly landscaped front yards. The neighborhood is also home to Shingle, American Foursquare, and Tudor Revival houses, among others. Prices for mansions can run into the millions, though smaller houses can be found for less than $200,000.
Why Buy Here?
Plainfield took a huge hit in the 1960s, when local social unrest led to the relocation of many residents and widespread disinvestment in the community. Today, the city is seeing an uptick of small, independently owned businesses as well as mainstream commercial development. An influx of young professionals making their homes in Van Wyck Brooks also signals a renaissance. Plainfield is about 30 miles from both Newark and New York City, and 74 miles from Philadelphia, so commuting is an option.