Housing Shows Small Recovery On Improvement In Weakest Markets, Fewer Underwater Homes

Housing is making a recovery–a tiny one. Some home prices in the weakest markets have begun to improve. In California, 20 of the 26 markets tracked by real estate research firm Zillow had price improvements in the second quarter. Homes in Los Angeles have risen by 5% from a year ago. San Diego’s gain was 7%.

The other piece of good news is that the percentage of underwater mortgages nationwide has improved slightly to 21.5% in the second quarter from 23.2% nationwide. Zillow is not certain the trend will continue as the number of foreclosures in the US continue to rise. The research company said that July and August may be the most telling months of the year for housing. If the second quarter trends hold, the sector may have found its bottom. Home values have fallen 24% from their nationwide peak in June 2006 and are back to the price levels from February 2004.The data adds to the fog of information about housing which has come from a number of private research firms and the federal government. Some data says the that the number of homes with mortgages that are “underwater” is 24%. Analysis from RealtyTrac shows that foreclosures are still running at a very high rate of well over 300,000 a month. Federal government information says that home values in most cities are still falling. Case-Shiller data says that house prices in the 20 largest markets have stabilized and in some cases are rising.

The fact that data about housing prices are contradictory cannot hide that housing may not recover for several years. If prices have indeed stabilized it is at a level well down from peaks reached four years ago. Mortgage rates are at historic lows, but there is a buyer’s strike in the industry that began as federal tax benefits expired at the end of April. The Zillow study may add to the debate about housing, but for people whose homes are in foreclosures or have mortgages that are well underwater, national data hardly matters.

Douglas A. McIntyre