Tuesday, January 3, 2012

Home prices may be more stable than we think

Posted on December 11th, 2011 by Carlo Capomazza
We all know they story of "Peter and the Wolf" or the boy who cried wolf—if one hears something over and again, despite how urgent it might be, it loses its impact the more you hear it.
This is the situation with the mortgage & real estate markets lately. As money changes hands more transactions are likely to occur. How many different times has the media reported that mortgage rates reached new lows? How many times have you heard that home prices have finally hit bottom?
After a while, it’s easy to lose sight of how significant certain movements of these two indicators actually are. One analyst has come out and said exactly that. When it comes to home prices, people aren’t paying enough attention to their recent improvements, said Barclays analyst Stephen Kim.

Non-distressed home prices improving

“In the absence of a government homebuyer incentive, prices for non-distressed home sales have stabilized for almost a year!” said Kim in a recent note to investors. “In our opinion, this is the most important trend in the housing industry right now, and we are amazed at how little attention it has been getting from the media and the Street. Meanwhile, we point out that this stability on the part of non-distressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices.”
Kim’s point is this: Sure, distressed properties weighed down overall measures of home prices, but when you examine non-distressed prices on their own, the data reveals that we may have hit bottom and things may be well on their way to improving, especially as we move into next year.
At least this another indication that things are moving in the right direction.
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