Case-Shiller Index Shows Prices Rise in September , full in bloom

The Case-Shiller index, which covers home values in the nation's 20 largest cities, was released on Wednesday. The index showed prices in those cities rose 1.7 percent in September, compared with August, and also indicated the smallest yearly gain for the index since February. The measure remains a staggering 28 percent below the peak levels of July 2006. 27 economists who participated in a recent survey conducted by Bloomberg had forecast a median gain of 2.1 percent.

The expiration of federal tax credits of as much as $8,000 back in April caused a severe downward trend in sales, which the market has yet to recover from. The decreased demand has, in turn, kept downward pressure on prices. Meanwhile, record numbers of foreclosed properties continue to enter the market as continued high levels of unemployment continue to hinder sales. All this leads to a diminished role for housing in the recovery of the overall economy.

The tax credits did their job by temporarily lifting the housing market through the end of 2009 and the beginning of this year. The original deadline for homebuyers to sign contracts in order to qualify for the credits was November 30th, and sales of existing homes that month, consequently, reached a 34-month high, figures from the National Association of Realtors show.

Sausalito Real Estate

The deadline was later extended to April 30th to sign contracts, and July sales numbers consequently reached a historic low among records that date back to 1999. The NAR reported this week that sales in September still fall short of June's pace. Analysts feel that the recovery which began late last year has basically run its course, and housing is now left with the significant hindrance of excess inventory fueled by record numbers of foreclosures in recent months.

The Case-Shiller index fell 0.3 percent from July to August after seasonal adjustments, the second monthly decrease in a row and the largest decline for the index since April 2009. Prices are calculated using a three-month average, meaning that August's numbers are still influenced by the slowed sales pace from the first few months after the tax credits' expiration.

A separate report released Wednesday by the Federal Housing Finance Agency indicated home prices in August were down 2.4 percent from a year earlier, while prices in July were up .4 percent. Both the Case-Shiller index and the FHFA data reflect repeat sales data that compares prices of the same properties over time. The Case-Shiller index, however, covers all home sales, while the FHFA data only accounts for sales of homes with mortgages that conform to Fannie Mae or Freddie Mac rules.

A recovery in housing is likely to be further delayed by the recent discovery of questionable foreclosure practices by some of the nation's largest lenders. JPMorgan Chase, Bank of America, and several other large lending institutions have voluntarily halted foreclosures as prosecutors from all 50 states launch a joint investigation into the matter. This could lead to a delayed influx of an enormous number of legitimately foreclosed properties several months down the line, which would lead to a drastic drop in prices and a blow to the delicate supply and demand in the market. -Adam Mills

Carmel Valley Real Estate