While the news may be full of doom and gloom, house prices are now rising, rather than falling, according to Citi’s Josh Levin.
Levin writes that, while the recent uptick may be merely the result of seasonal factors, the risk of a further collapse in prices has now declined. He doesn’t believe Gary Shilling’s projection, that house prices will fall 20%, will come to fruition.
From Josh Levin:
Contrary to the headlines, more timely data indicates that home prices are actually going up on a m/m basis and have been doing so since February. Such home price data comes from less well-known data sources such as Radar Logic and Altos. To be sure, such price improvements are largely if not exclusively due to seasonal factors and will likely fade in the fall. However, we think this recent price strength has both near-term and long-term positive implications for home prices and stocks which are sensitive to home prices.
Even if the seasonal price strength fades in the autumn, we believe it nonetheless suggests that home prices are likely to soften modestly from here and not fall another 10% to 20% as some bears are predicting…The fact that home prices are increasing and not decreasing in the first spring selling season in three years not to be aided by a homebuyer tax credit, and that distress sales as a percentage of total sales are close to an all-time high, suggests to us that home prices will not drop precipitously. Our best guess is a decline of ~5% or less.
Check out the recent uptick in the Radar Logic data, which typically leads the Case-Shiller, and suggests it will be positive by the summer.