Fiserv Case-Shiller Home Price Insights: Greater Affordability and Strengthening Economy Restoring Price Stability to U.S. Housing Market
- Home prices in the U.S. expected to decline 3.6 percent into mid-2012, and then rebound 2.4 percent in second half 2012 through first half 2013
- Price declines and low mortgage rates have resulted in dramatic improvement in housing affordability
- Ratio of monthly mortgage payment to median family income lowest on record; Monthly mortgage payment for a median-priced single-family home nearly 40 percent lower than at peak
The double-dip in home prices that started in 2010 continued to take
home prices lower this spring and summer. Single-family home prices
dropped 5.9 percent in 2011 second quarter compared to a year ago,
according to the national Fiserv Case-Shiller home price indexes. Prices
fell in 340 out of 384 metro areas, with 302 metros hitting new home
"Housing affordability has improved dramatically because of declines in
both prices and mortgage interest rates," said
Elaborating on the reasons for continued weakness in the housing market, Stiff continued, "Although homes have become much less expensive, housing demand remains depressed with existing home sales back to 1998 levels, averaging 4.3 million units per year since June. Many households cannot finance first-time or trade-up home purchases to take advantage of lower home prices because of much stricter mortgage lending standards. But even households with access to mortgage credit are hesitant to buy homes while job growth is weak and consumer confidence is low."
Stiff pointed to several factors that can help the market find a bottom and begin a gradual and cautious recovery. "If economic growth picks up in the second half of 2011, then home prices should stabilize early next year. New housing construction is at an all-time low and inventories of foreclosed properties are starting to shrink. Lower levels of housing supply and more steady demand next year will reduce downward pressure on prices. As homebuyers become more confident, many who are sitting on the sidelines will begin to enter the market and prices will start to increase. But we should not expect a rapid rebound in home prices. Very large inventories of foreclosed properties must be liquidated and absorbed before the healthy functioning of housing markets is restored."
"Potential buyers must be convinced that the economic recovery is back on track and that the double-dip in home prices is nearly over before housing demand will begin to rise," Stiff concluded.
Other highlights from the latest Fiserv Case-Shiller Indexes include:
- Prices dropped by double-digits in 30 metro areas, while 25 metro areas had small price increases of 1 percent or more.
Between 2011 second quarter and 2012 second quarter, prices are
projected to rise by double digits in only two metros
Madera- Chowchilla, Calif.and Carson City, Nev.) and decline by double digits in 16 metro areas ( Naples-Marco Island, Fla.; Las Vegas- Paradise, Nev.; Riverside- San Bernardino- Ontario, Calif.; Miami- Miami Beach-Kendall, Fla.; Salinas, Calif.; Cape Coral-Fort Myers, Fla.; Crestview- Fort Walton Beach- Destin, Fla.; Orlando- Kissimmee- Sanford, Fla.; Bethesda- Rockville- Frederick, MD; Merced, Calif.; Detroit- Livonia- Dearborn, Mich.; Jacksonville, Fla.; Ocean City, N.J.; Port St. Lucie, Fla.; Phoenix- Mesa- Glendale, Ariz.; Palm Coast, Fla.)
- Projections for the following 12 months, i.e. the 2012 second quarter to 2013 second quarter period, illustrate why the housing market is poised to stabilize next year: home prices in 372 of the 384 markets are projected to rise in that time period, with only 12 markets expected to experience declines.
Californiaand Floridahave borne the brunt of the worst declines in home prices. Of the 33 markets where homes have lost at least 50 percent of their value since peak, 28 are in the Sunshine and Golden States.
In markets with the largest home price bubbles and crashes,
improvements in housing affordability have been even larger. For
example, the ratio of monthly mortgage payment to family income
dropped from 32 percent (2006:Q1) to 11 percent in
Las Vegas, from 42 percent (2007:Q1) to 19 percent in Miami, and from 59 percent (2007:Q2) to 27 percent in Los Angeles.
The Fiserv Case-Shiller Indexes, which include data covering thousands
of zip codes, counties, metro areas and state markets, are owned and
Representative home price data for major U.S. markets:
|Metro Area||Population||Change in Home||Change in Home||Forecast Change in|
|(2008:Q2 to 2011:Q2)||(2010:Q2 to 2011:Q2)||(2011:Q2 to 2012:Q2)|
- Fiserv Case-Shiller - www.caseshiller.fiserv.com
Housing Finance Agency(FHFA) - http://www.fhfa.gov/
- A presentation on the most and least affordable markets in the country - http://slidesha.re/sz4gXL
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