A Housing Bottom Grows Nearer

The end of the month heralds the publication of the latest S&P/Case-Shiller data on home prices, and today’s the lucky day. Predictably, prominent media organizations are discussing the release in the present tense, despite the fact that it contains the March data. The new figures bring an unfortunate splash of cold water from that month — when it was not yet clear that the recession had ceased intensifying — on potential housing market participants now.

The news isn’t great, but neither is it entirely bad. Prices fell more than expected for the month, but the rate of decrease remained less than January’s record year-over-year decline. Interestingly, the steady rate of decline for March masked divergence within the composite indexes. Price decreases accelerated in some markets — among them, Las Vegas, Detroit, Minneapolis, and Miami. Elsewhere, on the other hand, the rate of decline slowed or halted, and for the first time since last autumn, several metropolitan areas experienced an increase in price on a month-to-month basis. Dallas, Charlotte, and Denver saw their numbers rise in March. The apparent strength is partially due to seasonal effects, but given the woeful climate that prevailed in March, it seems quite likely that a small but growing number of metropolitan areas has seen a housing market bottom.

The tricky part of the equation is the unemployment effect. These days, job loss is the principle driver of defaults and foreclosures. A great many owners who had determined to continue paying the mortgage on an underwater home are finding themselves unemployed and unable to pay or sell for enough to settle the debt. And heavy foreclosure activity translates into steadily falling prices. Current and future divergence in housing prices across cities is going to have a lot to do with the job markets in question. In places where job losses are beginning to plateau and decline, housing will bottom earlier. In places where job losses continue to grow — say, in the industrial Midwest, where automaker bankruptcies are taking a toll — additional waves of foreclosures with consequent price drops are likely.

Some metropolitan areas are beginning to see the light at the end of the tunnel. Others have years of darkness left in front of them.