What's the deal with prices?
Sales may be up, but prices continue to lag.
The just released S&P/Case-Shiller national home price index reported a 8.9 percent decline in prices in the third quarter.
That is being billed as an improvement, given we saw pretty steep declines of 14.7 percent and 19 percent, respectively, in the previous two quarters, but its still a decline.
Meanwhile, home prices in Massachusetts dropped 2.6 percent in October, to a median sales price of $287,000, while condo values fell 4 percent to $240,000, the Massachusetts Association of Realtors reports.
Even the Boston metro market, a Case-Shiller star over the past several months, showed signs of weakness in the latest batch of numbers.
After a number of month-over-month gains, the Boston metro market actually saw prices drop from .3 percent from August to September. (That said, Boston prices are off just 3.3 percent from September 2008, still making it one of the best performing of the 20 major metro markets tracked by Case-Shiller.)
The continued weakness in pricing comes even as sales have posted some impressive though arguably tax credit fueled increases.
Home sales were up for the fourth straight month in Masssachusetts, jumping 17.7 percent in October, while condo sales were not far behind, rising 17.2 percent, according to MAR.
Nationally, resales of existing homes soared 10.1 percent, the highest in two years, the National Association of Realtors reports.
So what to make of this disconnect between rising sales and still falling prices?
One obvious theory is that you need months of mounting sales momentum first before you start to see prices start to move up as well.
Yet I suspect that is too simple an explanation for the complicated market we are dealing with now, pulled hard in different directions by competing forces.
On one side you have the stimulus of tax credits, on the the other, downward pressure from still rising joblessness and foreclosures.
The recently extended and expanded home buyer tax credit may also be pushing down prices, even as it helps push buyers into the market.
The credit is much more of incentive for buyers of low and mid-priced homes, spurring more sales farther down the price ladder.
The high end of the market, by contrast, is still grappling with a more difficult jumbo loan market.
So will prices eventually catch up with sales?
My bet is they will. But if sales stop rolling forward, whether because of a double dip recession or from a botched pullback from the tax credit, then look out below.
