The April data (which represents an average of Feb, Mar, and April) are in, and the news is encouraging. The seasonally adjusted CaseShiller home price index was up 0.7% for the month, while over the past six months, prices are up at an annualized rate of 0.5%. The unadjusted Radar Logic series shows that over the past year, prices have fallen by only 0.9%. Home prices appear to be bottoming.
On an inflation-adjusted basis, prices have fallen by 40% from their early 2006 high. After six years of huge declines in new construction and a huge decline in real prices, the U.S. housing market is finding a new equilibrium. In fact, anecdotal evidence suggests that prices are now rising in many markets. Even though there is a large overhang of foreclosed real estate still on the books of banks, buyers are ever-more willing to snap up homes as they come on the market. Should the psychology of the market improve to the point where the public comes to believe that overall prices are rising, demand could easily rise to match any increase in the sales of foreclosed properties. This is how markets clear: it takes time to work off excess inventories, and it takes a change in price to bring buyers and sellers together, but we seem to have achieved both those conditions.