The most recent S&P/Case-Shiller Home Price Indices was released on Tuesday and the news wasn’t as optimistic as we would like. The S&P/Case-Shiller monthly report is the leading measure of U.S. home prices and their report this week states that home prices fell 5.3 percent over the last two quarters of 2010, essentially negating the 4.9 percent growth seen in the previous year. Many analysts are using these numbers to confirm a housing double-dip.

The only two markets that saw year-over-year increases in home prices were San Diego and Washington DC – making this drop in home prices such that values are hovering around where there were in 2002. Analysts believe that the declines partly stem from the expiration of the homebuyer tax credit in April 2010, but that truly isn’t explanation enough. Prices have continued to fall for eight months after that, which is really an indicator that the foreclosures on the market (that are driving down home prices) need to be cycled through before we can move forward with more clean and accurate data. In fact, it is estimated that 850,000 homes are for sale with another properties in the foreclosure pipeline. This oversupply of distressed properties – no doubt – will continue to push prices downward.

When can we expect home values to rebound? Unfortunately, it will still take some time. And let’s take these numbers in perspective: a 1.6 percent decline, year-over-year, remains a modest drop. Yes, we would like to see the numbers go in the opposite direction but as far as drops go, 1.6 percent isn’t terrible.

However, it is important that we remain optimistic. It is always normal for sales to be slower in the winter. And the foreclosures are skewing data. Let’s wait until at least the spring and more toward the end of the summer to see where home prices take us.

Also, another report came out the same day as the Case-Shiller numbers indicating that consumer confidence is the highest it has been in awhile. Confidence among U.S. consumers rose in February 2011 to the highest level in three years as people became more optimistic about both their individual incomes as well as the economy-at-large.

The Conference Board’s index of sentiment increased to 70.4, the highest since February 2008. This pickup in optimism may encourage people to increase purchases, which would – in turn – bolstering consumer spending, the largest part of the economy. At the same time, unrest in the Middle East and Africa has recently strained the stock market and oil prices, which may make Americans uneasy even with the conflict being abroad. It’s all a balancing act but as of right now, Americans are optimistic which is good news.

The index’s data showed that the share of Americans who said they expect their incomes to increase in the next six months rose to 17.3 in February from 15.3 in January. Additionally, those who said jobs were currently plentiful rose to 4.9 this month from 4.6, the fourth straight gain. Since the largest concern is jobs, this piece of data is especially significant. And these gains mirror other consumer confidence reports that have been released in the past month.

Essentially, we’re seeing that the housing industry is taking time to recover. And a double dip may be taking place right now. However, it does not mean that an economic recovery is taking place. We are – indeed – in the recovery phase. We just need to be patient as the housing industry cycles through these foreclosures and makes its way back. Consumers are optimistic, jobs are coming back and the housing industry is seeing a lot of stability with a recovery not far from reach.

 

 

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