Home prices stable, but recovery will take time

Real estate data firm Clear Capital recently released its Home Data Index (HDI) Market Report ending with the month of November 2011, indicating U.S. home prices rose only 0.3 percent from the second quarter to the third.

Real estate data firm Clear Capital recently released its Home Data Index (HDI) Market Report ending with the month of November 2011, indicating U.S. home prices rose only 0.3 percent from the second quarter to the third.

Year-over-year prices declined 2.2 percent, the 14th consecutive month of lower home prices. Despite continuing that trend, however, the price levels were improved over the previous month, when the yearly decline was 2.8 percent.

The report notes some submarkets may have experienced larger drops in prices, but for the most part, the nation's four regions have equalized. Analysts noted the variation in quarterly price changes between regions was only 2 percent. Real-estate owned properties accounted for just under a quarter of transactions, which the firm notes also shows a measure of stability. The report indicates saturation of REO properties is likely the cause of variation in submarkets.

"The overall market stability in this month’s report gives me hope that housing markets are settling after a very turbulent two years," said Clear Capital's director of research and analytics, Alex Villacorta. "With only a one percent drop in national home prices since January and virtually no change in prices over the last six months, strong evidence suggests the big swings that many market participants are accustomed to could become a thing of the past."

In the long-term, a recent Wall Street Journal survey of economists indicates the housing market will not return to normal before 2016. The majority of the respondents indicated that, while home prices will begin increasing in 2012, they will do so at a rate slower than inflation for at least three years.

According to the Journal, housing historically drives economic recovery and home prices typically rise faster than inflation during recovery periods, but most of the economists responding to the survey indicated the effect of excess inventory and low consumer confidence will restrain that tendency.

Instead, they predict the housing market will stabilize and then contribute slightly to economic growth. While construction has slowed to account for the current decrease in demand, experts indicate the high down payment requirements, decreased interest and fear are cutting down on the number of people able and willing to pursue homeownership.



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