The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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August 29, 2012

Rising House Prices: The Good Fortune Spreads

On the heels of a rash of pretty good news related to residential real estate—including yesterday's pending home sales report—the June S&P/Case-Shiller report on housing prices checks in with positive monthly gains across all markets in its 20-city composite for the second month in a row. What's more, the index posted its first year-over-year gain since last summer.

The early reviews found little to dislike, from Calculated Risk...

This was better than the consensus forecast and the change to a year-over-year increase is significant.

...to Carpe Diem...

More evidence that the U.S. housing market has passed the bottom and is now in a period of sustainable recovery.

...to TimeBusiness...

[T]he housing market is steadily improving and is poised to contribute to economic growth this year. Modest economic growth and job gains are encouraging more Americans to buy homes.

The widespread nature of price firming evident in the Case-Shiller index is strikingly confirmed by looking at even more disaggregated data. The following chart shows June year-over-year price growth by zip code, before the crisis hit and since, based on data available from CoreLogic:

The sample represented by the chart covers about 21 percent of all of the zip codes in the nation, and is based (like Case-Shiller) on a repeat-sales methodology.

The striking aspect, of course, is that there haven't been price increases in the majority of the sample's zip codes since before 2007 (although there was improvement evident in 2010, followed by the re-emergence of broader weakness in 2011). Furthermore, the uniformity of the picture becomes even more apparent when you look market by market (across which the experience is not so uniform). Two of the big comeback stories—Miami and Phoenix—were uniform in the breadth of the suffering across their metro areas during the worst of the slump and are now just as uniform in recovery:

Folks in Atlanta, on the other hand—which remains the big negative outlier in the year-over-year Case-Shiller statistics—are just as uniform as Miami and Phoenix, but in the pain rather gain department:

Even so, the Atlanta market has had two consecutive months of Case-Shiller housing price appreciation and experienced the largest monthly percentage gains in the June report. It does appear that the rising residential real estate tide is raising most boats.

David AltigBy Dave Altig, executive vice president and research director;

Myriam Quispe-AgnoliMyriam Quispe-Agnoli, research economist and assistant policy adviser; and

Jessica DillJessica Dill, senior economic research analyst, and all with the Atlanta Fed

August 29, 2012 in Housing , Real Estate | Permalink


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the same analysts who panned the homebuyer tax credits as temporary market distortions are ignoring the temporary distortion in home prices caused by operation twist induced record low interest rates, which effectively reduces the amount a buyer pays for a home even as the list price rises..

the average interest rate on fixed rate 30 year mortgages in July was 3.55%, a full percentage point lower than Freddie Mac's had the 30 year mortgage rate at a year ago...a simple mortgage calculation shows that the monthly cost per $100,000 on a 30 year mortgage in july of 2012 was $451.84, compared to the $509.66 per $100K one would have paid monthly on a 30 year mortgage last July; that means to buy the same house a year ago would have cost a potential homeowner 12.8% more in payments monthly than it would cost under current interest rate regimes...so even should July's home price indexes show a 2.8% year over year gain in the principal price of the house, it would mean that potential home buyers are still commiting 10% less to homeownership than they were a year ago...the so-called housing recovery is merely a fiction of low interest rates, which will not stay this low forever...

Posted by: rjs | August 29, 2012 at 07:32 PM

Just like the unemployment figures, which don't reflect the numbers of those unemployed who have exited the job market, the housing data do not reflect those houses that have been taken off the market nor do they reflect those houses that have not been put on the market due to depressed prices. Once a steady trend of home sales begins, those who have been waiting on the sidelines will put their homes on the market driving prices down once again. The solution is not short term. The reality is, we are in the midst of (and have been for the past three years) the greatest redistribution of wealth in our Nation's history.

Posted by: Kirk Wiles | September 04, 2012 at 01:39 PM

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