REAL ESTATE RETURNS TO 2006 BOOM LEVEL—WHAT’S NEXT?
Article Written by: Phil Fricke, REALTOR®, Dalton Wade Real Estate Group
Strength…to Downturn, to …?…
That the corona virus pandemic has brought the U.S. economy to a near standstill is incontrovertible. Economic growth was strong up to the COVID-19 shutdown. Recently reported employment statistics showing tens of millions of citizens applying for unemployment is but a precursor to future data that almost certainly will show slowdown of epic magnitude. Questions—How bad? How long, and from What level do we measure real growth?
Real Estate Matters—February Data Showed a Return to Boom Level Prices
Ownership of a home is a key investment for households—perhaps the major investment in many cases. The value of one’s home is probably a key component of how a family (individual) assesses financial well-being. What does the data show?
The media often reports “median” home prices as a measure of home value. This metric, however, is not a valid measure of home pricing trends. Representing the mid- point of a frequency distribution of data, it is affected by mix. Percentage changes in median price never represent the change in value of your home.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index is published by Standard & Poors and does represent an accurate picture of what the change in value of a house has been for a defined time period. The data reflects: 1) a national average; 2) a 20-city composite; 3) a 10-city composite; and 4) statistics for individual cities.
So, here are the most interesting findings for the month of February…
- Back to the 2006 Peak. The 20-city peak for home prices was recorded July 2006 at 206.52. The index fell 35.1% to 134.07 March 2012. The February 2020 Index hit 219.75, a 6.4% gain from previous record level of 206.52 recorded in July 2006.
- 20-City Composite Increased 3.5% to 219.75 in February 2020 vs. February 2019.
- Tampa Records Better-Than-Market Price Increase. The S&P CoreLogic-Case Shiller Index for Tampa rose 5.2% in February 2020 vs. February 2019, exceeding the 20-city increase significantly. Great news for Tampa residents!
What is Ahead? No Definitive Answer, But Optimistic About Tampa!
This writer’s pedigree includes experience as an economist, stock analyst, and banker on Wall Street—a little bit of background for offering commentary on the economic outlook. So here goes…
- There can be no certainty. We are in unchartered territory. Nevertheless…
- … stock market values have recovered significantly from the panic low. This is important, because investment portfolios are the backbone of financial well-being for many households. So, a bit of good news here.
- This writer believes that the foundation of the economy remains sound.
- Underlying demand for homes is more likely to remain robust, and inventory short.
- Signed contracts to purchase residential real estate almost certainly will fall sharply and closings are likely to decline for at least several months before stabilization. The price Index is likely to trend lower, too.
- Recovery in the residential home market could commence by summer or early fall, if not sooner. Prices should stabilize.
- By this time next year, the housing market could return to growth and the price Index could re-establish itself at if not higher than the February 2010 level.
- Tampa is a great city and should be a leader in recovery. The flock to Florida from high tax states and from foreign markets should remain strong, and this is a bounty for the Tampa Bay area.
Conclusion—Expect a sharp weakening in the housing market near-term but anticipate strong recovery by Fall (if not sooner) with Tampa leading the way. Stay the course!“Interested in exploring further detail about home pricing trends? Click here:https://us.spindices.com/index-family/sp-corelogic-case-shiller/sp-corelogic-case-shiller-compositewhere you will be able to review the full recent pricing report issued by S&P.
Article Written by: Phil Fricke, REALTOR®, Dalton Wade Real Estate Group
