Home prices in the Chicago area rose for the third straight month in June, raising them up to a level equivalent with a year ago, new data released Tuesday shows.
While Chicago’s one-month price gains were greater than many of the cities in the S&P/Case-Shiller Home Price Indices, national economic trends are likely to temper future home price appreciation, economists said.
“It’s a mixed bag,” said Yale economics professor Robert Shiller, “Corporate profits are still strong, inventories are low and that’s supposed to be a positive indicator. But confidence is a major driver of the economy. What really bothers me is the very high level of long-term unemployment.”
Shiller added the nation could see “a jobless recovery that could last for years.”
Nationally, home prices are 3.6 percent above their level of a year ago.
Between the peak of the Chicago housing market in September 2006 and its trough in March, home prices plunged 29 percent. The 2.5 percent gain in June followed a gain of 1.2 percent in May.
Other economists share the same worries as the authors of the widely watched Case-Shiller report, particularly given the dismal reports on new and existing home sales during July.
“Since the credit expired and the economy started rolling over again, home sales have taken an Acapulco-style cliff dive,” said Mike Larson, a Weiss Research analyst. “Anyone who thinks that won’t impact the pricing figures down the road needs to spend some time reading his Economics 101 textbook.”
During a Sunday morning interview on CNN, Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, did not immediately dismiss the idea of again bringing back a federal homebuyer tax credit, which has been credited for driving home purchases last fall and again this spring. That ignited a flurry of speculation but Shiller and David Blitzer, managing director and chairman of the index committee at S&P Indices, oppose such a move.
“I would view this as a mistake,” Blitzer said. “You create a little activity but every time you do this, you get a little less activity and it wears thin.”
We may be heading for a triple dip in home prices. Sure, we’ve seen the 3rd month of price increases but this still reflects the tax credit impact (the Case Shiller index is a 3 month average). Recently sales have died and about 40% of the home sales are either short sales or foreclosures. Wait until that hits the index.
You can see the long term trend in Chicago single family and condo prices on the first graph here: http://chicagohousingstats.com The good news is that prices are 12.3% below the long term trend line.
I’m no expert on the housing market but when interest rates rise housing prices have no where to go but down. I look at properties on Refin and see that there are many homes listed for more than the owner paid in 2006. These same homes have been on the market for more than 300 days. I just don’t think owners are being realistic and hence we have a stalled market.
Complete hokum. More empty-headed blather and spin so folks will “put on a happy face” and believe we are turning a corner on this dismal real estate market! (And of course, the local and national economies will follow…)
Not happening.