Northeast Home Price Index 2012-04-01 to 2012-04-30

Summary:
In April, the Northeast home price index followed the dire trend it has been on for the past several months, loosing 0.11% from the previous month and 4.12% from one year ago. The New York Case-Shiller index offered little help, shedding 0.09% month-over-month and 3.74% year-over-year. Meanwhile, the Boston index was a bit more robust, losing only 0.07% month-over-month but gaining 0.11% from April 2011.

Extended Analysis:
In March’s press release, Case-Shiller analysts noted that even though the composite-10 and composite-20 indices were in steady decline, the rate of decline had decelerated and a turning point seemed imminent. This theory proved fruitful in April, as both the 10-city and 20-city indices advanced by about 1.3%. After seasonal adjustment, both composite indices have gained positive ground every month since February, and even here the momentum is continually pushing towards growth. The success of these indexes was partially reflected in the Midwest, as our home price index for that region (also deflated by the CP) reached a similar turning point this month, by increasing month-over-month for the first time since July of last year. Meanwhile, the Northeast home price index is still trending down, although the momentum of this downward movement has slowed in the past two months. The real estate market of these two regions, though showing signs of life, still has a long way to go, as annual gains have not been realized for either region in nearly two years. Moreover, this fact is made worse by the recovery seen in Florida’s real estate market, at least for potential retirees from the Northeast and Midwest. These would-be Florida residents now must compete with international buyers, who are taking advantage of the U.S. real estate bust and, in many cases, don’t have to deal with the current hassles of U.S. mortgage lenders.

Of the two cities considered in our Northeast index, Boston is certainly faring better these days. Although it lost some ground in April, the Boston index has toyed with the idea of trending upward, as it has been in a pattern of moving up one month and then down the next for about five months now. Moreover, it seems to have bottomed out in December 2011, while the New York index simply hits a new post-recession low each month. The only good news for New York is that, according to data from Zillow.com, sales in New York City have been increasing during the past two months. If this is any indication, prices may start to rebound soon, as February 2012’s sales numbers were the lowest that region had suffered since the housing bust. Moreover, rental rates seem to be rising in both the Boston and New York metro areas—with New York having a greater rate of acceleration—which tends to bring capital to an area, even if locals aren’t soaking up much of the demand.

Although the U.S. real estate market will fail to fully recover until credit markets loosen, there is an ever-increasing demand from consumers. Part of the issue lies in the Eurozone, as many banks—often the mortgage lenders—have financial ties to European banks and nations. But even if U.S banks take their time loosening their “wallets,” improving economic conditions in the U.S. mean that the credit-quality of the average citizen is increasing, which also helps citizens to secure more loans. Therefore, we believe that the Northeast HPI will finally show improvement in May—if only a little—advancing to somewhere around 115.