There has been a lot of talk in recent weeks about the improving housing market. One of the most closely followed indicators, the S&P/Case-Shiller Index, came out today. The results were consistent with the thesis that the housing market is improving. The 20-City Composite index showed marginal improvement on both a month-over-month and a year-over-year basis. Indeed, the numbers have been improving for five months in a row. (See the tail end of the chart above.) Because Case-Shiller is delayed by almost two months, the most recent figures reflect sales in June. As a result, it is entirely possible that the housing market is actually stronger than what the latest numbers indicate.
Keep in mind that Case-Shiller does not examine new home sales. It examines repeat sales of existing homes only. Since the existing home market is much larger than the new home market, the improving figures are all the more encouraging. Despite the improvement, however, the gains are minuscule and the index remains depressed. In fact, the year-over-year gain was less than one-half of one percent. The Case-Shiller index remains 32% below the all-time high set in April 2006. According to the index, on average, homes purchased after June 2003 are now worth less than they were then.
Despite the most recent improvements, housing prices are not about to escalate. The most we can say for now is that the declines might be over. We would need to see much stronger job creation before any meaningful housing appreciation occurs.
