Case-Shiller Index For May 2010

The May Case-Shiller Index was published on Tuesday, May 25th 2010.  As always, the index reports on data 60 days in arrears.  Therefore, the index reports metro Atlanta home values for March 2010.  So what does the latest index show and what does that mean for home values in metro Atlanta? 

Before we provide the answer, we want to make two caveats.  First, the Case-Shiller index of home values is very different from average sale prices which reflect the average prices of what is being sold in the market.  This index reflects the averages for metro Atlanta.  Remember, people do not buy houses in America or even in metro Atlanta.  They buy a specific property on a street in a local community.  Real estate is local and every market is different.  Your local agent expert can help you understand the specific metrics in your local market.  However, these metrics are a good general indication on what is happening in our market.   

Now for the news….  The March index established a new low for Metro Atlanta and shows the 7th drop in a row after 5 positive months in a row.  The March index is 103.74 which is 1.81% down from last month.  Click on the link below to open the Excel spreadsheet that shows the details of the latest index.

Case Shiller Index – Atlanta – March 2010 Index

The peak of our market was July of 2007 according to the Case-Shiller index.  The previous bottom was March of 2009.  This new index low is 1.27% below the previous low point.  In August of 2009, we had seen 5 months of increasing values and were 5.8% above the March 2009 index.  Since then, we have slipped and down 23.98% from the peak of July 2007.  The spring selling season has been very active in March and April  showing year-to-year increases in pendings of 47% and 28% respectively.  Inventory for March was down 17% and April was down 14%.  This increased demand and lower inventory will begin to reflect in a higher Case-Shiller Index for April and the spring and summer months.  Remember, Case-Shiller reflects closed sales and not pended sales.  It takes a few months for the more positive pending sales trends to translate to closings.   Therefore, we predict that metro Atlanta home values may have seen the bottom in March of 2010.  We expect to see the index improving in the spring and continue with slight gains in the summer.  We may see slight declines later this fall and winter but do not expect to test the low point of March 2010.  We expect a slow but sure increase in values for 2010 and beyond.  Remember, you will not know the bottom of the market until it is passed.  

If you look at the average annual Case-Shiller index for each year, here is how homes purchased in recent years would compare to the current index: 

• Homes Bought in 2000 – Gain of .49%
• Homes Bought in 2001 – Loss of 4.84%
• Homes Bought in 2002 – Loss of 8.37%
• Homes Bought in 2003 – Loss of 11.25%
• Homes Bought in 2004 – Loss of 14.27%
• Homes Bought in 2005 – Loss of 18.39%
• Homes Bought in 2006 – Loss of 22.11%
• Homes Bought in 2007 – Loss of 22.61%
• Homes Bought in 2008 – Loss of 15.41%

Homes values are essentially the same as the spring of 2000 right now.  Yes, we are slowly climbing our way out of this unprecedented housing crisis – but we are not there yet.  So where will home values go from here?  The key factors that will impact our home values include the following: 

1. Demand From Buyers (We expect to see continued demand through spring and summer months.)
2. Mortgage Rates/ Credit Availability (We expect to see incredibly low mortgage rates for an extended period with increases coming in late 2010 and 2011.)     
3. Supply/ Inventory Levels (We expect inventory levels to remain lower than normal.)
4. Competition from Short Sales/ Foreclosures (We expect to see significant numbers of short sales & foreclosures for the next two years.  However, we do not expect a flood of foreclosures that drives the overall inventory too high.)  

You and your agent should be carefully watching the trends for short sales and foreclosures.  Right now, home affordability is exceptional.  We still have the combination of low home prices and the lowest mortgage rates in 50 years.  Many wonderful properties are available below their replacement costs.  But this scenario will not last forever.  Rates will go up over time.  Home values will be increasing – slowly but surely.  Yes, we will continue to see some ups and downs along the way, but home values are on the rise.  In 5 or 10 years, many will look back and regret not buying their dream home when they had the chance!     

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