San Diego Home Prices … Have They Hit Bottom?
In the just released Case-Shiller home price index, the leading measure of U.S. home prices, San Diego house values rose 0.4 percent in June compared with May, and 11.2 percent compared with June 2009.
This report showed the U.S. National Home Price Index rose 4.4% in the second quarter of 2010, after having fallen 2.8% in the first quarter. Nationally, home prices are 3.6% above their year-earlier levels. In June, 17 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up; and the two composites and 15 MSAs showed year-over-year gains. Housing prices have rebounded from crisis lows, but other recent housing indicators point to more ominous signals as tax incentives have ended and foreclosures continue.
Keep in mind that Case-Shiller data is two months old! We know it is going down from the sugar-high of the tax credit, and the there is a glutton of shadow inventory sitting out there, waiting to be put on the market. To top off that, we have a very large number of homeowners defaulting now and more in the near future.
It seems likely that the San Diego housing market will get worse before it improves.
With renewed talk of yet another Federal real estate buyer’s handout, if it materializes, it will yet again, just extend the inevitable true market bottom and stabilization.
Personally I believe, instead of throwing additional Trillions in housing incentives, the Federal government should just allow investors to get the same tax benefit homeowners now enjoy.
If investors are exempted from capital gains on their real estate profits, this will be the kick in the rear the real estate market needs to form a true bottom. Naturally, the tax break would have to be limited both on the holding of properties to prevent house flipping. It could be as simple as saying anyone who buys a home/condo within the next six/nine months and holds it a minimum of two years and maximum of six years would be exempt from capital gains on up to $200k of any profit.
The video below (sorry about the ad .. I could not remove it) is a very good Debate on whether another housing bailout is needed, with Robert Shiller, Yale School of Management; James Altucher, Formula Capital; Michael Ozanian, Forbes National.
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San Diego home prices have stopped falling and it looks like we may be building a base now.