Housing Prices Continue to Fall

I have heard from many financial pundits that housing values are on the upswing. Modest forecasts for the values to rise in 2010 are abound. I just don't buy this and here is why.

One of the reports the Fed's use is the First American Core Logic Housing Index and monthly index tracking housing values on a monthly basis. (They also use the Case Shiller Reports, which are quarterly, hence First American is more timely).

The latest report from First American Core Logic Index shows a .2% decline in the latest national reports from October 2009 to November 2009.

Nationally the Home Price Index or HPI has dropped by 30% since it's peak in April 2006. This includes all homes sales including foreclosures and short sales. Excluding these distressed properties, the HPI has fallen 21.8% from the same peak.

This trend is expected to continue for some months to come, and although the banks have held back inventories referred to as "shadow inventories", the value losses have continued. This tells me that the housing decline is no longer the distressed homes driving the market downward, it is now more due to current economic conditions such as unemployment, and low consumer confidence.

The banking sector would be better advised to release these shadow inventories since most economists project the number of foreclosures is rising past it's highest levels on record, and a jobless recovery is where we are at due to high unemployment which is also expected to go even higher.

So to anyone speculating that home values are going to rise this year should pay attention to these facts. I live in the world of solid facts, not the belief or hope things are on the mend now.

Still having said all that, this is the best real estate market we will probably see in our lifetimes if we are willing to understand the facts. New home buyer or investor this is the time, flippers need not apply!