Monday, July 26, 2010

Survey shows house prices falling in June, but long wait for house price indexes

by Bill McBride on 7/26/2010 02:20:00 PM

Campbell Surveys put out a press release this morning: Home Prices Tumble in Most Categories During June (no link)

A drop in homebuyer activity helped trigger a noticeable decline in home prices between May and June, according to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions.
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Average prices tumbled by 6.8% for move-in ready foreclosed properties, 6.3% for short sales, and 4.6% for non-distressed properties.
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“Prices are dropping…same house that had 2 showings a day in April with hopes of a closing by June at $139,000 now gets a showing of just one a week if we are lucky and at $129,000,” reported a real estate agent responding to the survey and located in Florida.

“Buyers just plan on deducting the $8,000 off what they are going to offer now. So, now prices are dropping to compensate for the credit not being available,” stated an agent located in Ohio.
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“Contracts signed in June will be closing in July and August,” explained [Thomas Popik, research director for Campbell Surveys]. “That’s why we know prices for closed transactions will continue their decline. But this won’t be reflected in the publicly-released price indexes until October or November.”
We already know existing home sales collapsed in July, however, as Popik notes, it will take some time for the impact on house prices to show up in the house price indexes.

The Case-Shiller index is a three month average and is released with a two month lag. The Case-Shiller house price index to be released tomorrow will be for a three month average ending in May.

The first Case-Shiller release with July prices will be released at the end of September - and that will include the months of May, June and July! And prices were probably up in May and June.

And prices don't fall overnight. Based on the timing of the above survey, prices fell from May to June - and those transactions will probably mostly closed in August. That is why Popik is saying the price declines will not show up in house price indexes until October of November.

The Corelogic data for July will also be released in September. There are other repeat sales measures (like from Radar Logic and Clear Capital), but in general it will be a long wait before reported house prices are falling.