A flurry of economic reports unleashed in August left the national housing market reeling and on the ropes as it headed into the final round of what is typically the heavy buying season.
With each month like another grueling round for a pugilist in dire need of a cut doctor, the housing market is sweating prices and bleeding sales as it faces the grim possibility of going down for the count.
Yet, even with the wind all but knocked out of the housing bubble and hopes for a comeback slim, some experts hesitated calling the fight after more than a month of mortgage interest rate declines put some punch back into buying power.
Here's the count:
- The Standard & Poor's/Case-Shiller Home Price Index of 10 major metropolitan areas reported in August that single-family home prices revealed zero appreciation from May to June, after only a 0.5 percent gain from April to May as the market braced for price depreciation.
The year-over-year composite gain slowed to 8.2 percent in June, from 9.7 percent in May and the 20.4 percent peak in July 2004.
"Home prices are clearly decelerating," said Yale University economist Robert Shiller, the chief economist at MacroMarkets LLC, who has warned of a house price bubble going bust. Shiller predicted the tech-sector driven stock market bust more than half a decade ago and co-developed the index with S&P.
"We continue to see year-over-year gains shrinking. For example, San Diego reported a halving of annual gains from last month, down from 3 percent to 1.7 percent. The 10-city composite has shown deceleration over the last 7 months and is well below its peak growth rate of 20.4 percent, which occurred in July 2004. It appears that some of the major metro areas, including Los Angeles, San Diego, Las Vegas and Boston saw their markets' growth rates peak around that time, leading to the deceleration in the composite since then," Shiller added.
Six of the 10 metro areas showed a month-over-month decline from May to June, with Boston reporting the largest monthly loss and an annual price loss of almost 2 percent, the index revealed.
- John Burns Real Estate Consulting reported 84 of 100 of the nation's largest housing markets are overpriced with only 13 markets below historical median affordability levels and three at their historical affordability level.
Burns said in nine markets, prices are so high the markets were worse off in August in terms of affordability than in the early 1980s when interest rates were 18 percent or more. They were New York; Washington, D.C.; Los Angeles; Seattle; Portland; Baltimore; Edison; , Nassau; and Naples.
The calculations in Burns' "The Housing Cycle Barometer" consider the ratio between home prices and income levels; the ratio between mortgage payments and income levels and an analysis of 25 years of history for the ratios.
- Freddie Mac reported the average fixed interest rate on a 30-year conforming loan dropped to 6.44 percent by the end of August and was down for six consecutive weeks, and 40 basis points lower than its 2006 peak of 6.8 percent in July.
Unfortunately, given the high cost of housing, that wasn't nearly enough to offset flat incomes. Workers received a piddling 2 cents more an hour in August this year, compared to a year ago, according to U.S. Bureau of Labor Statistics. The bureau also said the national unemployment rate was just as flat, barely falling to 4.7 percent in August, compared to 4.9 percent a year ago.
- The annual rate of home sales dropped for a fourth consecutive month in July, down 4.1 percent to the slowest pace since January 2004 and median existing home price rose only 0.9 percent, the smallest annual gain since May 1995, according to the National Association of Realtors.
But NAR says its Pending Home Sales Index reveals sales should hold their own in the coming rounds.
"Based on recent changes from a year ago, the index shows existing-home sales should continue to ease after a stronger-than-expected decline in July, but are likely to flatten in the months ahead," said David Lereah, NAR's chief economist.
On September 1, the index, based on contracts signed in July, was down 7.0 percent from June and down 16 percent from July 2005.
Those are tough odds for an even fight.
Lereah said, in the popular refrain used when sales sour and prices slip, buyers are getting psyched out by the media which is playing the role of the spoiler.
"We've never seen a general decline in the housing market against a healthy economic backdrop where jobs are being created, the economy is growing and interest rates are favorable.
Psychological factors are causing some buyers to remain on the sidelines, waiting for prices to stabilize or for more favorable news about the market and the economy. Contributing to this hesitancy is a lot of negative news stories, but in the end we believe that underlying market fundamentals will prevail," he said.
Perhaps, but don't count buyers out, just yet. They may be just throwing in the towel for a later rematch.
When it comes to housing, consumers today lace their gloves with information -- digital and otherwise -- and then take it to the market, fighting smart.
Housing consumers are well aware the more affordable rental market is making a come back as a contender for their housing dollars.
There's always an opportunity for a rematch.
