Major US cities registered improvements of up to 4.2 percent for single-family homes in the month of June but many economists remained wary that the spike was temporary and mainly due to the April expiration of the federal-sponsored home buyer tax credit.
Should that be the case then the inevitable tumbling of home prices would hit back soon and experts said that the plunge this time could cut a lot deeper.
In any case, S&P/Case-Shiller had reported on its latest home price index that out of the of 20 giant US cities covered on its study, 15 showed marked upward surge with San Francisco leading the pack by posting a 14.3 percent jump on home prices.
San Diego, Minneapolis and Washington queued up after the Golden city, with all accumulating double-digit gains from the same period while on the end of the spectrum, Las Vegas still showed weak prices as home prices in the area dipped by 5.2 percent, with Charlotte, Seattle, Tampa and Chicago all queuing down in registering value declines.
A Bloomberg News survey showed that economists had only projected a 3.5 percent upward movement yet the surpassing mark delivered in June failed to dampen lingering worries that the worst has had its share of good times as experts pointed to an alarming indicator that despite the supply surplus and low mortgage rates, home prices continued sliding since the tax credit became unavailable.
Industry experts also noted that the June data also carried sales report from April and May, which were still covered by the tax credit, prompting Mitchell Hochberg of Madden Real Estate Ventures to exclaim that “the report shows the ship is dead in the water now that the home buyer tax credits have expired.”
That grim reality was further confirmed when the July homes sales were made public as the National Association of Realtors reported that sales of previously owned home in the month had retreated to its lowest since 1995, while the Commerce Department revealed that new home sales had nose-dived into its lowest level since the government started recording four decades ago.
The figures all came tumbling down because the government incentive was no longer in effect yet analysts said that the contrasting rosy picture presented by the improving home prices could on mean one thing, that is the market was unable to sustain the perceived imbalance that exists in housing supply and demand.
However, the imbalance may not be around for far too long and for the wrong reason as according to Paul Dales of Capital Economics, “now that home sales have fallen through the floor, it is only a matter of time before prices fall back.”
His contention was supported by Wellesley College economic professor Karl Case, who declared that the reported home price increases in June were inconsistent with the longer term reality that housing in the United States has been rendered cheaper by the crisis.
Case pointed to the national data released on Tuesday which showed that home prices went down by 28 percent from the high seen in July 2006 though the figures were six percent higher when compared to the low levels experienced in April 2009.
From that result, Case said that the national average could be as low as 30 percent and a 30-year mortgage with a fixed interest of four percent would only require a monthly payment that has been reduced into half as compared to previous nationwide numbers.
The professor said that now is the best time to get that dream home as he argued that “it’s the best affordable housing program we’ve ever had in this country,” yet nobody seems rushing to buy.