More Foreclosure Auctions May Hasten Housing Comeback
May 27 2008 - Karl Case, co-founder of a home-price index that bears his name, said more auctions of foreclosed properties are helping remove inventory from the housing market and may lead to a faster recovery.
“I think we’re going to see some signs of life in the next few months,” Case, an economics professor at Wellesley College in Wellesley, Massachusetts, said in an interview with Bloomberg Radio. “The market is beginning to clear somewhat. There is some good news in this.”
Home prices in 20 U.S. metropolitan areas fell in March from a year earlier by 14.4 percent, the most on record, according to the S&P/Case-Shiller home-price index released today. The year-on-year gauge has fallen every month since January 2007, as the U.S. housing market undergoes its worst slump in a quarter century.
Case said the quickening pace of home-price declines reflected mounting auction sales along with traditional transactions. “Banks don’t wait around,” he said. “They put it on the market and get rid of it. That means prices adjust more rapidly.”
The slide in prices may already be contributing to a recovery in demand in some areas. Sales in the San Francisco region jumped 29 percent in April from the previous month, the biggest March-to-April gain in at least 20 years, according to DataQuick Information Systems in San Diego. The median price was $518,000, down 22 percent from the $655,000 peak in June and July 2007, the real estate data company said.
Foreclosure Filings
U.S. foreclosure filings climbed 65 percent and bank seizures more than doubled in April from a year earlier as rates on adjustable mortgages increased and vacated homes added to a glut of unsold properties, RealtyTrac Inc. said May 14.
Inventories in April totaled 4.55 million homes for resale, the second-highest level on record, with the month’s supply amounting to 11.2 months, the highest ever, the National Association of Realtors said last week. Sales were down 18 percent from a year earlier and 33 percent lower than their record pace in September 2005.
Case said housing starts, which fell to a 954,000 annual pace in March, might also be signaling a turnaround in the market. He said starts “go below a million every single time, and then they come back.”
The home-price measure was created by Case and Robert Shiller, an economics professor at Yale University, and is based on their research in the 1980s. Housing has undergone the biggest speculative boom in U.S. history, Shiller said in the second edition of his 2000 book, “Irrational Exuberance,” which predicted the stock market would collapse.
Case Says More Foreclosure Auctions May Hasten Housing Comeback
by Kathleen Hays and Bob Willis | Bloomberg