By: Favian ClaiData released on Tuesday reports that National home prices rose for the fourth month in August. However, economists warn that the housing market is still not stable, and expect prices to drop again before they stabilize.
According to the S&P Case-Shiller home price index, the price of homes in 20 US metropolitan areas rose over 1% in August from the previous month. However, values remain about 11% down from what they were one year ago.
Some of the hardest hit markets in the housing crisis, like San Francisco saw a 2.8% increase in home prices with Minneapolis seeing the greatest gain, at 3.2%. However the biggest drop occurred in Las Vegas where prices declined around 30%.
Analysts predict another drop in prices as the housing market moves to its traditionally slower months after the spring and summer. It is expected that the rising tide of foreclosures could excess the supply and reverse the recent marginal price gains in addition to a continued shaky economy.
They believe that demand was boosted by tax credits and investors, but at the same time, supply was restrained by the various foreclosure-prevention programs and the government's continued efforts to revive the mortgage market. Sood from the S&P/Case-Shiller home price index noted that "this entry-level stabilization was real, but it is principally government-sponsored and therefore tenuous".
Despite home prices stabilizing and mortgage rates remaining low, delinquencies continue to rise along with foreclosures.
The committee chairman for Standard & Poor's Index believes that the rate of annual decline in home prices continue to improve. However, he is cautiously reminding people of the upcoming expiration of the tax credit and anticipated higher unemployment rates through year-end. He believes that both may have a dampening effect on home prices.
The Consumer Confidence Survey shows that the news is already well known by consumers. It appears that consumers continue to be bearish about the economy due to the job outlook. The results of the survey signals the second month of declining consumer confidence in a volatile market, which will directly hinder the overall economic recovery.
Lastly, the Federal Reserve has artificially kept rates low by buying government debt and aggressively pushing liquidity into the mortgage market, which has largely helped the market. The fear is that once this support begins to taper off, the effect on the market remains unknown. Will it negatively impact the market or positively impact it?
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The Consumer Confidence Survey is a monthly survey of 5,000 consumers on their attitudes of present economic conditions and their expectation of future conditions. When a consumer is optimistic, they are more likely to spend money while those who are pessimistic are more likely to save
