The rate at which home prices are dropping may be slowly coming to a halt across the United States, with analyst at Barclays Capital predicting only a 4 or 5% dip left to go before stabilization. But the rate of appreciation on the back side of that bottoming out is likely to muddle along for the next few years.
This conclusion is based on expected aftershocks of the ”smoothed-out” Housing Supply model, where millions of potential foreclosures are being averted temporarily with governmen’t back programs or by suppliers slowing the rate in which foreclosures hit the market. On the positive side, they said this effort actually prevented some prices from falling considerably more.
But the “smoothed-out” method, while successful on the supply side, is coming at a cost. The overhang of distressed inventories is a huge negative technical-it suggests that any price rise will probably be met by increased distressed sales.
Meanwhile, home prices do seem a little cheap, using fundamental metrics like, price/rents and price/income ratios, but not extremely so. Obviously, a meaningful rise in prices would mean big changes on both the technical and fundamental fronts.
Home prices dipped only slightly in December, according to Standard and Poor’s Case Shiller U.S. National home price index. However, it is the recent drop in new home sales, down 11.2% from December to January that we find disappointing.
And in added response to claims that housing is becoming more and more affordable in the United States, the report adds that affordability indices are not good predictors of future moves in home prices.
