By Bob Stahl, www.MyPhoenixMLS.com For REALTOR.com® The most recent S&P/Case-Shiller home price indexes were released on Tuesday, reporting that home prices rose more than expected.
By Bob Stahl, www.MyPhoenixMLS.com
For REALTOR.com®
The most recent S&P/Case-Shiller home price indexes were released on Tuesday, reporting that home prices rose more than expected. Nationally, home values rose 1.3 percent in May 2010 from a month earlier, with 13 of 20 cities showing prices gains compared to a year ago (and 19 of 20 cities showing price gains in May compared to April). At first glance, one might think that home prices are stabilizing.
But what is really interesting is the discrepancy of home price changes from city to city. Some cities rose well into the double digits compared to a year ago while others dropped significantly. That doesn’t signal a nation-wide stabilization.
For example, if you’re a San Francisco resident, you might be led to believe that the good days are back again – with an 18.3 percent increase year-over-year in home prices. That is astounding.
However, if you’re in Las Vegas, you saw a 6.5 percent decrease in home prices year-over-year. Again, this isn’t showing much consistency across the board, something that many Americans are very eager to see.
So what’s behind the large difference in home price fluctuations? Is the housing market completely reliant on the number one rule in real estate: location, location, location? Well, yes, partly. That and economics.
I’ll explain. Let’s look at the metro area that I’m most familiar with – Phoenix – and two other metros that are frequently compared to Phoenix: Las Vegas and Miami. Home values soared in all three cities during the early part of the last decade, then plummeted in the last few years. All three have struggled with high foreclosure rates.
Yet – according to the Case-Shiller numbers released this week – year-over-year statistics have home prices rising 7.2 percent in Phoenix, with a modest increase of 1.2 percent in Miami and a decrease of 6.5 percent in Las Vegas. Why the big difference in three metros that are otherwise so similar?
Part of the reason is that Phoenix has a healthier job market than the other two cities. I am proud to say that our unemployment rate was 8.7 percent in May (at the time that the Case Shiller numbers were run). That is one point lower than the national average. Las Vegas, meanwhile, had a 14.1 percent unemployment rate in May, while Miami had an 11.2 percent rate.
With less people employed, there were fewer people able to take advantage of the homebuyer tax credit that was hugely popular and expired at the end of April. It’s also less people who can jump into real estate to take advantage of the low mortgage rates. It’s really difficult for those incentives to work in locations where unemployment is a problem for many of the residents.
Overall, the numbers that were released this week by Case-Shiller were good in regard to real estate. But it demonstrates that the economy is still an issue and we need to focus on jobs, jobs, jobs. With people employed in jobs, the rest of the industries – including real estate – can truly stabilize. And then we will all sigh with relief – and maybe even feel San Francisco’s optimism.
Home Prices, by Metro Area
Source: Standard & Poor’s and FiservData
Bob Stahl is a REALTOR® at Keller Williams Arizona Realty in Phoenix, AZ.
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