Last week, Standard and Poor’s released the Case-Shiller housing price index which showed a continued drop in home prices in every one of the 20 metro areas it tracks. This isn’t the whole story, however, because the National Association of Realtors reported just a few days later that new home sales were up in February.
This is good news because it suggests in some markets the back log of inventory may be hitting bottom. This may be particularly true in metro areas such as Miami, San Francisco, and Las Vegas where prices have fallen by more than 40% from their peak. The large inventory, combined with low prices, means those potential buyers with good credit histories and cash can buy up homes at a bargain.
The Realtors estimate that 45 percent of the homes being purchased are in foreclosure or in some form of financial distress. The Mortgage Bankers Association also reports an increase in mortgage activity, although 80 percent of the loan volume is refinancing at lower interest rates.
Notes David Crowe, chief economist at the National Assocation of Hombe Builders: