Home Prices Up; Don’t Get Excited
It was reported that home prices had gone up for three months in a row, after being in a decline for so long. Actually, home prices had been up in some areas and not in many others, but they seem to be going up in most major American cities, at least for now.
Home prices through August have shown a gain of 1% from July in 20 major cities, but they’re still down more than 11% from August of last year. What’s bringing the number down is the collapse of home prices in cities like Las Vegas, which declined even more in August, and is down 56% in value from the same time last year.
So, what drove this increase in home prices? The $8,000 tax credit is getting a lot of, well, credit for this mini-boom. And that’s problem number one, as there’s only one more money of this benefit before it goes away. Will it go away for good is an interesting question, since it was actually an extension of a previous credit of $7,500 from the year before.
Problem number two is that unemployment, if it continues, will mean more homes will be foreclosed upon, more people will be in default, and spending will stop again. Unfortunately, unemployment doesn’t seem to be slowing down any, and with Capmark going into bankruptcy, potentially signaling that the commercial real estate bust is about to begin, it doesn’t seem feasible to expect home prices to continue growing for much longer.
Still, a little good news isn’t such a bad thing, right? I’m sure the housing market will take it for now, and hope to build on it in some fashion for the future.