Over the Fourth of July weekend, HUD Secretary Shaun Donovan set off some fireworks when he predicted, during an interview with CNN, that any further significant home price declines were “very unlikely,” and that sustainable price increases could start emerging by the end of the summer.
Builders have their fingers crossed that Donovan’s weather vane is pointed in the right direction. And in some recovering markets there has been price appreciation for new home sales, or at least stabilization. For example, in May median home-sale prices in Denver, at $230,000, were level with a year earlier.
How one reads Donovan’s prediction, though, depends on one’s definition of “significant” and “sustainable,” because there’s been little evidence in early summer that prices were going anywhere but down. Indeed, on Thursday morning Fannie Mae released results from its June National Housing Survey, in which 25% of the 1,000 adults it polled expected house prices to decline, the highest number since that agency initiated its survey a year ago. The respondents project that home prices would fall by another 0.5% over the next 12 months.
Of the 27 economists that CNN/Money surveyed about the housing market, only three expected prices to rise this year, and 22 predicted a 3.9% decline, according to results released on Thursday.
“It would be great in a weak economy if the housing market would just go up. But now it looks a little bit troublesome,” said Yale University economist Robert Shiller, co-author of the monthly S&P/Case-Shiller Home Price Index, which tracks existing-home prices in 20 markets. Shiller made this remark during Standard & Poor’s Housing Conference in New York last month, where he also expressed concern that the U.S. economy might be like Japan’s in the 1990s, when that country suffered through a decade-long recession.
A quick scan of news reports around the country lends support to impressions that house prices haven’t hit bottom yet. For example, Toll Brothers is currently selling a 3,500-square-foot home in its Azura community near Boca Raton, Fla., for $790,995, or $200,000 less than what that same house was selling for 18 months ago, when Toll acquired that property in a foreclosure sale.
Median home prices in Seattle in June stood at $353,500, or 4.7% below the same month a year ago. The price erosion was considerably worse in that market’s King County, where home prices on its northside were off 16.6% on a yearly basis to $288,475; and by 25.7%, to $170,000, on its southwest side.
For the 22 business days ended June 15, the median home price in Fountain Valley, Calif., fell by 2.7% to $555,000, according to estimates by DataQuick Information Services. Throughout Orange County, home prices during that period dipped 3.1% to $435,000, compared to the same period a year ago.
John Caulfield is senior editor for Builder magazine