Dennis Norman Musings

Dennis Norman

By: Dennis Norman

Investors, get those check books ready, maybe it’s time to buy again?  Adding to the list of recent positive reports on the housing market and home prices is the Housing Market Report that was issued this morning by Radarlogic.  According to the report home prices increased in June from the previous month in 23 out of the 25 metropolitan areas tracked by their company.

Overall the composite for all 25 metros showed a 3% gain in price from May to June representing one of the largest monthly gains reported by RadarLogic since June 2000. There has been a trend of price increases reported for the 25 metro areas for the past few months. In fact, the increase in the Radar Logic Composite from February to June outpaced the house price gains over the same period during the previous threes years, and the increase in house prices from April to June was the largest since the beginning of Radar Logic’s date in 2000.

Other highlights from the RadarLogic Housing Market report for June are:

• In 14 of the 25 metro areas tracked by Radar Logic, over half of all homes sold in June were sold at a price per square foot within one standard deviation of the mean motivated price (in plain language I think what they are trying to say is the prices between a “normal” home sale and a “motivated sale” (such as a foreclosure) did not have a large gap between them indicating that foreclosures have done all the damage to home prices they are going to do and home prices may be stabilizing.)
• Since the beginning of 2009, home sales in the top 50 percent of zip codes ranked by median home price have become a larger share of total sales in each of the 25 metro areas.  More expensive homes are finally starting to sell again, perhaps it’s time to look at that market again and not just the first-time buyer market? 

The Radar Logic report states “observing the current upward momentum in prices, it is reasonable to believe that the housing sector may see a late seasonal peak this year.  Even as traditional summer buyers begin to fall out of the market with the winter months approaching, well-capitalized investors should remain in the market, snapping up short sales and foreclosure inventory as it becomes available.”

The following list shows the metro areas covered by the RadarLogic report where home prices have done the best in the past year:

• Philadelphia – 2.9 percent decline in home prices
• Charlotte – 3.2 percent decline in home prices
• Milwaukee – 3.7 percent decline in home prices
• Cleveland – 4.6 percent decline in home prices
• Washington D.C. – 5.7 percent decline in home prices

The list below shows the metro areas that, of the 25 covered, home prices have done the poorest in the past year:

• Las Vegas – 32.1 percent decline in home prices
• Phoenix – 26.6 percent decline in home prices
• Miami – 23.3 percent decline in home prices
• Chicago – 21.4 percent decline in home prices
• Detroit – 20.2 percent decline in home prices

The report also states “the stabilization and subsequent uptick in home prices in the first half of 2009 indicates a return of demand on the part of buyers, and the shift in the mix of sales toward more expensive neighborhoods sheds some light on who those buyers are.  Given the shift in sales toward homes in expensive neighborhoods, first-time home buyers may not be driving demand, particularly given the conservative lending environment.”

This is good news since the first-time buyer tax credit runs out soon and the concern has been afterward the market would suffer as a result.  Based upon the Radarlogic report, that may not be the case at all since the more expensive markets are seeing activity again.  While I would definitely be conservative in this market I think if I would consider looking in some of the better performing markets in move-up price ranges for opportunities.