The State of the Housing Market
During the past year ending September, homes sales have declined by 13%. In combination with the volatility in stock prices, some are concerned about the condition of the U.S. economy.
In the past, housing market declines have been an indicator of a future decline in economic activity. However, in the aggregate, we believe housing is sending mixed signals. You see, while sales are down, prices have increased.
For example, the Case-Shiller index shows that housing prices are rising in most of the 20 cities covered by the indicator, as well as in the U.S. (in aggregate). During the past year, Las Vegas housing prices increased 13.9% (ending August), San Francisco was up 10.6%, and Seattle increased 9.6%. New York and Washington, D.C. prices have increased a more moderate 2.8% during the past year.
The graph shows Las Vegas and San Francisco declined the most during the 2008 recession and consequently have the most snap-back potential. Today, if anything, it appears prices are closer to new highs – suggesting that individuals can afford more expensive homes.
One area that has cooled down is ocean front land. A recent New York Times article notes that individuals living on the shore are having trouble getting people to even look at property. Why? The Times’ suggest rising water levels and more severe weather because of global warming. Buyers seem to be focusing on homes close to shore but not on it.