LPS Home Price Index (HPI) Shows National Home Prices Rose .2%, First Rise Since March 2010; Sales Volume 30% Lower Than Any Point Since 1998; Another Low-Volume Failure?

The latest LPS HPI Release suggests home prices are flattening out if not bottoming. Data is from February.

Highlights

• Nationally, February seasonally-adjusted prices rose 0.2%, the first such increase since March 2010
• The average US home price in February was $195K, on par with levels seen back in June of 2003 
• LPS projects a further 0.3% increase in the national average home price for March 2012 
• The average discount on a short sale property in March was 23%; for a foreclosed property sale, 29%
• Of the 26 MSAs tracked by both LPS and the BLS, only Los Angeles, San Diego and San Francisco saw price declines in February
• Honolulu, Portland, OR., Seattle and Tampa all saw increases of more than 1% over the month

LPS HPI Chart



U.S. home prices (black line) have declined since April 2009 at a slower rate than immediately following the market peak. The rate was slowest for April 2009 through April 2010, as indicated in the figure. Prices at the current level match those seen in June 2003. The seasonally adjusted LPS HPI (blue dashed line) shows the trend changes even more clearly.

Cautious Optimism or Another Low-Volume Failure?

From the Report ...

Lender Processing Services, Inc., a leading provider of technology, data and analytics for the mortgage and real estate industries, today announced that its LPS Applied Analytics division updated its home price index (LPS HPI) with residential sales concluded during February 2012.

"Our HPI shows an increase in seasonally adjusted prices this month for the first time since March 2010, and for only the third time in five years,� said Raj Dosaj, vice president of LPS Applied Analytics.

�There have been signs of price declines slowing for a few months now, and our estimates for next month are flat to slightly positive.

Without a pickup in sales volumes from their current anemic levels, it�s hard to be more optimistic that the market may be nearing the end of its fall.

�Reasons for caution are clear, as we�ve been here before. Non-seasonally adjusted prices increased for a few months in early 2009, 2010 and 2011 � trends that all ended by summer, after which all the gains � and then some � were lost.

As is true this month, those temporary increases were on low sales volumes � about 30 percent lower than at any point since 1998. Furthermore, the inventory of distressed homes remains high, which will continue to put a drag on prices.�

The report is along the lines I stated in New American Dream is Renting; Reflections on Renting Houses, Cars, Books, Clothes; Will Rentership Fuel the Next Boom? What About Home Prices?

When sentiment on houses reaches the widespread belief  "It's Better to Rent", prices are bottoming. I expressed that thought on numerous occasions since 2005.

This is how I currently see things, and arrows in red represent my calls in real rime.

click on chart for sharper image

Bottoming Process

Some cities are further from the bottom than others, but it is likely some cities have now finally bottomed.

That said, I do not think home prices are going much of anywhere "in general" because there is still years of shadow inventory and years of foreclosures to work through.

Moreover boomer demographics suggest much downsizing is ahead (and who will boomers sell their mansions to?)

Finally, generation Y has far different attitudes than boomers regarding wealth, debt, and possessions and will carry those attitudes for a long time having seen firsthand the trouble their parents and grandparents got into with too much debt, and how they are in the same boat with student debt.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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