These are confusing days for anyone for clear signals from the housing market. A flurry of reports released this week shows what appears to be conflicting trends. Here's a summary of those reports:
- The Case-Shiller house price index released Tuesday morning showed that home prices in 20 U.S. cities rose 13.3 percent during September following a 12.8-percent gain during the previous month. Nationwide, that was the biggest gain since February 2006. The Twin Cities index for September was up 10.1 percent year-over-year, and 0.8 percent over August. Compared with the other 20 cities, that was a moderately strong gain.
- Also, Tuesday, the U.S. Census bureau said this morning that the number of building permits issued during October increased 6.2 percent to a seasonally adjusted annual rate of 1.03 million units, the highest since June 2008. Permits were up 13.9 percent compared with last year.
- Another Tuesday report from CoreLogic said that foreclosure rates in Minneapolis-St. Paul-Bloomington decreased during September decreased 0.72 percentage points compared last year. That puts the rate of Minneapolis-St. Paul-Bloomington area foreclosures among outstanding mortgage loans at 0.83 percent compared with 1.55 percent last year. Foreclosure activity in region was lower than the national foreclosure rate, which fell to 2.29 percent.
- On Monday, the National Association of Realtors said that pending sales - an indication of future closings - dipped 0.6 percent during October. That was the fifth straight month of declines and the lowest level since December. There is generally a one- to two-month lag between a signed contract and a completed sale, suggesting that closings could continue to fall.
With pending sales falling, home prices rising and home building on the upswing, what's a news junkie to make of these numbers? The housing market is in the midst of a seasonal slow-down exacerbated by the government shut-down and higher mortgage rates. Indeed, low inventory is putting upward pressure on home prices - and the demand for new houses. But the unusually strong price gains are more a reflection reflection of mid-summer investor purchases and big declines in foreclosure sales.
Here's a very good summary of the situation from David Blitzer, chairman of the index committee for Case-Shiller: "Housing continues to emerge from the financial crisis: the proportion of homes in foreclosure is declining and consumers’ balance sheets are strengthening. The longer run question is whether household formation continues to recover and if home ownership will return to the peak levels seen in 2004.”