At first glance, the latest U.S. home price data from S&P/Case-Shiller seems promising. Its index of 20 of the country’s biggest cities shows home prices rising 1.1% between May and June.
But adjusting for what some economists call a “seasonal kick” in real estate activity, the index actually inched 0.1% lower.
“Once you correct for the stronger summer months it’s just like it’s flat and it’s been flat now for you know mostly three years. And so we look kind of stuck.”
On a year-over-year basis prices were down 4.5%.
High unemployment and still very strict lending standards mean many people can’t afford to buy a home. And those who can are nervous about home prices, says Patrick Newport of IHS Global Insight .
“I think the perception for most home buyers is that they could drop a lot more and so if you go into the market and you put a 20% down payment on a home there’s a good chance that you could lose a lot of that down payment off the bat. And so in a lot of cases it makes sense just to sit and wait, wait this out.”
That strategy may pay off. Many economists expect future data to show another 5% to 10% drop in home values as confidence sinks and foreclosures remain high.
There’s talk of government help but…
“We’re in a politically difficult situation. Right now the government has taken over Fannie and Freddie and they are supporting, they and the FHA, are supporting most housing. It’s become political. We can’t really agree on a stimulus.”
The housing market also faces a continued slog as it heads into the traditionally slower autumn and winter seasons.
Bottom line: At first blush the latest S&P/Case-Shiller Home Price Index shows a jump in June prices, but digging deeper, prices actually dipped from the prior month and analysts predict another 5% to 10% price drop.