Most people have become accustomed to announcements relating to the real estate market being bad, and the latest round of reports leave little to be excited about. As a result of this supply glut, prices are forecast to continue their slide into 2012, potentially derailing broader economic recovery. See the following article from Property Wire for more on this.
Residential property prices in the US increased at one of the slowest rates in a decade between May and June of this year, according to the latest data to be released.
Analysts now expect prices to fall during the rest of 2010 and are warning that a double dip in the real estate market could hamper the country’s economic recovery.
This week has seen a series of gloomy figures released showing that the end of tax benefits for buyers has resulted in a severe downturn in the market.
Earlier this week the latest report from the National Association of Realtors showed that residential property sales in the US plummeted in July, falling 27.2% from the previous month, the lowest level since the NAR began publishing its reports in 1999.
Now the latest composite price index from Radar Logic underlines the weakness in the real estate market. Its June RPX composite price index, which measures per square foot home pricing trends in 25 metropolitan statistical areas, shows that over half of the MSAs tracked by the company posted month over month price declines. On a year on year basis, only seven MSAs posted price gains during June.
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The 25 MSA RPX Composite price for June 24 was $197.09 per square foot, just $1.09, 0.6%, higher than a month earlier and flat year on year, the second worst performance for the month of June since the beginning of Radar Logic’s data. The average May to June increase over the last ten years has been $2.75, or 1.4%, the firm said.
‘In a sign of weakness to come, the RPX composite price for the Western region hit its peak for the year in May and declined sharply in June. The Western region has been the source of much of the recent strength in the 25 MSA RPX Composite, outperforming the other regions year to date and year on year on a composite-price basis. The end of seasonal price gains in the West suggests that the 25 MSA RPX Composite will soon start to decline as well,’ its report said.
Even those few markets still holding onto annual gains aren’t likely to escape a downturn. Locations like San Jose, San Diego, and San Francisco, the three most improved markets year on year, saw a fundamental shift in the mix of sales away from relatively low priced distressed sales and toward relatively high priced non distressed sales, rather than an improvement in the value of most homes.
‘The broader issue is that in early spring we began to see trends of an overwhelming supply, both shadow and actual inventory. It has now grown from being a simple supply issue to a psychological issue on the buy side. Buyers are going to want bigger discounts,’ said Michael Feder, chief executive of Radar Logic
Feder said that borrowers are now faced with growing negative equity and a herd like mentality where strategic default may take hold of entire neighborhoods.
Sales are also falling. Transaction dropped 7.3% in June relative to May, the single largest monthly decline ever observed for June since the beginning of Radar Logic’s historical data in January 2000. In comparison, sales activity increased from May to June in all 25 MSAs in both 2008 and 2009.
Radar Logic expects a decline in sales activity and prices during the rest of the year. Its analysis is backed up by another report that shows confidence in the property market is declining.
The new August MacroMarkets home price expectations survey that questions economists, real estate experts, investment experts and market strategists, predicts house price declines for the remainder of the year, with cumulative negative activity likely until 2012 and beyond.
‘For the third consecutive month, the consensus from the experts indicates weakened overall confidence in the US housing recovery, with only 21% of our panelists now predicting positive growth in prices nationwide for 2010, and average expected cumulative price appreciation through 2014 falling almost one-third since our inaugural survey just three months ago,’ said Robert Shiller, MacroMarkets co-founder and chief economist.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.