Home Values In 95% Of Case-Shiller Markets Are Improving Year-To-Year

For August, the Case-Shiller Index showed annual home values improving across 19 of 20 U.S. markets. It's the first time in 3-plus years that the benchmark housing index has shown such strength.

According to a Case-Shiller Index spokesperson, "The rate of annual decline in home price values continues to improve."

It's yet another sign that housing may have already bottomed.

However, just because the Case-Shiller Index shows a stabilization in home values, that doesn't necessarily make it true. This is because real estate happens on the local level and the Case-Shiller Index is more "national". It tracks data in just 20 U.S. cities.

Homeowners everywhere else are unaccounted for.

Furthermore, even within the 20 tracked Case-Shiller markets, there's no allowance for the natural sub-markets that exist. Some neighborhoods under-perform and some neighborhoods out-perform.

Case-Shiller treats them all the same.

Despite its imperfections, though, the Case-Shiller Index remains a helpful, broader measurement of U.S. real estate. Economists believe that housing led the U.S. into the recession and they believe housing will lead us out, too.

If that's true, August's Case-Shiller data is another step in the right direction.

Falling Home Supplies Mean More Multiple-Offer Situations For Buyers

The national housing supply fell to a 2-year low last month, according to the National Association of Realtors®.

At the current sales pace, existing home inventories would sell out in 7.8 months -- 30 percent faster versus November 2008.

For a 10-month window, that's a major housing supply reduction and it helps to explain why multiple-offer situations have been so common lately.

Moreover, the same report from NAR showed sales activity reaching its highest point since July 2007, too.

If you're looking for evidence that the long-standing Buyers Market is ending, this month's Existing Home Sales report might be it.

Even median sales prices -- typically dragged lower by distressed and foreclosed properties -- declined at its slowest pace in a year.  The market may have turned a corner.

Home prices are rooted in the basic economics of supply and demand.

• When supply outweighs demand, home prices fall
  
• When supply lags demand, home price rise

Since March 2009, the market has been moving in the right direction.  Low mortgage rates, ample housing supply and a first-time home buyer tax credit fueled buy-side demand so that home prices are now rising in many U.S. markets.

If home supplies stay on this path into 2010, expect home prices to rise even more.

Government : Home Values Edged Lower In August

According to the government, home values edged lower last month.

The Federal Housing Finance Agency's Home Price Index report shows values down by 0.3 percent from the month prior -- the index's first down month since April.

The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a "national" real estate index than its private-sector cousin, the Case-Shiller Index.

But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn't account for homes meeting any of the following descriptions:

1. Is considered new construction
   
2. Is a multi-unit property
   
3. Is financed by an entity other than Fannie Mae or Freddie Mac

Given the resurgence of FHA financing this year, this last exclusion is especially glaring.  FHA represents about one-third of all mortgage loans in 2009.

Because of these exceptions, some analysts label the Home Price Index incomplete.  The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.

In light of these shortcomings, therefore, what's most important is to recognize that both of the "popular" home valuation reports show similar patterns -- home prices have leveled and are showing signs of a rebound.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

Government : Home Values Edged Lower In August

According to the government, home values edged lower last month.

The Federal Housing Finance Agency's Home Price Index report shows values down by 0.3 percent from the month prior -- the index's first down month since April.

The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a "national" real estate index that its private-sector cousin, the Case-Shiller Index.

But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn't account for homes meeting any of the following descriptions:

1. Is considered new construction
   
2. Is a multi-unit property
   
3. Is financed by an entity other than Fannie Mae or Freddie Mac

Given the resurgence of FHA financing this year, this last exclusion is especially glaring.  FHA represents about one-third of all mortgage loans in 2009.

Because of these exceptions, some analysts label the Home Price Index incomplete.  The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.

In light of these shortcomings, therefore, what's most important to today's home buyers and sellers is to know that each of the "popular" home valuation reports show similar patterns -- home prices have leveled and may be starting to recover in earnest.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.