Home Prices in 20 U.S. Cities Rose 0.3% in January

[Purveyor]

By Shobhana Chandra

March 30 (Bloomberg) -- Home prices in 20 U.S. cities unexpectedly rose in January, indicating the housing market is stabilizing as the economy expands.

The S&P/Case-Shiller home-price index climbed 0.3 percent from the prior month on a seasonally adjusted basis, matching the gain in December, the group said today in New York. The gauge was down 0.7 percent from January 2009, the smallest year- over-year decrease in three years.

Cheaper homes, low borrowing costs and government incentives have combined to support the housing market, which helped trigger the worst recession since the 1930s. Gains in hiring are required to overcome mounting foreclosures that are keeping pressure on prices and posing a threat of renewed declines in real estate.

“It’s a temporary stabilization,” said Joseph Brusuelas, president of Brusuelas Analytics in Stamford, Connecticut, who had forecast a month-over-month gain in the adjusted index. “Foreclosures are still going to bite the market. Given the preponderance of negative housing data, we may see another leg down.”

A separate report showed consumer confidence improved in March as Americans perceived employment was starting to improve. The Conference Board’s index rose to 52.5 this month from 46.4 in February.

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http://www.bloomberg.com/apps/news?pid=20601010&sid=ahc80Imb5LBg

[taught_me_patience]

1. That's what happens when you throw trillions

towards reinflating the housing market.

[upi402]

2. Except banks aren't giving the refleif out

USbank is doing the same crap. They need to be sued too. But Obama was on 'Today' and said that jobs aren't coming back. So this gimmick wont last and houses will come down on the wicked witch and the curtain will be pulled back on the great Oz.

[amborin]

3. prolly due to the tax credit; the overall outlook is bleak

[Mojorabbit]

4. There is that chart floating around

(that I can't find just now) showing a huge amt of loans getting ready to reset in the next few years. We are in no way out of the woods in the housing sector.

[amborin]

5. economist who predicted housing bubble says: "Beware"

Economist Who Foretold First Housing Bubble Says, 'Beware'
CEPR Statement on Obama Administration's Housing Initiative
WASHINGTON - Dean Baker released the following statement today regarding the Obama Administration's overhaul of its foreclosure prevention program:

Dean Baker: "The biggest winners are likely once again to be the banks." (photo by flickr user TheTruthAbout...)The latest Obama Administration initiative aimed at easing the nation's foreclosure crisis may be well-intentioned, but fails to give proper consideration to the state of the housing market. The biggest winners are likely once again to be the banks. In particular, holders of second mortgages are likely to see this program as a huge bonanza.

The program provides a substantial incentive for holders of first mortgages to reduce principal by having the Federal Housing Authority (FHA) guarantee a new loan at 97.75 percent of the current market value. In many cases this would be far more than the holder of the first mortgage would collect if the loan went through a foreclosure process. However, the payment on the second mortgage would be unaffected.

By substantially reducing the required payment on the first mortgage, the program will be creating a situation in which the second mortgage - which would be worth little or nothing in foreclosure - will suddenly again hold considerable value. This will be a huge windfall for second mortgage holders. It is worth noting that the major banks have vast portfolios of second mortgages.

In the current market, the newly guaranteed FHA loans are likely to incur substantial losses. Nationwide home prices remain about 15 percent above their long-term trend. There is an enormous oversupply of housing at present as indicated by falling rents and a record nationwide vacancy rate. In addition, there will be an obvious problem of adverse selection as lenders will be most likely to take advantage of this principal write-down process in markets where prices are expected to fall further.

If the purpose of this modification program is to help homeowners, then any policy must ask two simple questions.

1.Is the homeowner paying less in ownership costs than they would to rent a comparable unit?
2.Is the homeowner likely to end up with equity in their home if they sell it in the next 3-5 years?
Both of these questions require an assessment of specific housing markets. If the market is still bubble-inflated, then the answers to these questions will be no and any money spent on modifications will be helping banks, not homeowners.


For some reason there is an enormous reluctance to ask these basic questions about the housing market. The failure to ask these questions in the years 2002-2006 provided the basis for the housing bubble.