Housing Still in “Bottoming Process” But Worst Is Over, Zillow’s Humphries Says

By Daniel Gross


After plummeting sharply in July, existing home sales rose 7.6 percent in August, the National Association of Realtors reported on Thursday. Sales were down 19 percent from a year ago, while prices were up 1.2 percent.

Home sales data have been volatile in recent months due to the federal tax credit for home purchases, which expired in the spring. But August’s figures represent something of a return to normal, says Stan Humphries, chief economist of Zillow.com.


“The housing market is continuing its bottoming process,” Humphries tells me and Aaron in the accompanying clip.”What we’re seeing is what we’ve been expecting.” 

The NAR’s figures largely jibe with data that Zillow, the popular home appraisal and real estate information site, crunches on its own. The Zillow Home Value Index, which measures the market values of homes for sale, shows values fell 3.2 percent between August 2009 and August 2010, and rose 0.2 percent between July 2010 and August 2010.


“We’re still seeing some depreciation, but it is trending upwards toward a flat market, which we expect toward the end of the year,” he says.

Homeowners remain torn about the prospects of the market. “Homeowners are in flux right now in terms of what their expectations are,” Humphries says, referring to Zillow’s homeowner sentiment survey. “A lot of them believe we’re in a bottoming process, but a fair number do believe the bottom still lays ahead.”


Zillow’s most recent sentiment survey, published in August , found that in the second quarter of 2010, 28 percent believed home values in their markets would fall in the next six months, while 30 percent said they’d rise and 42 percent said they’d stay the same.


Look Beyond Housing’s Shadow


One big issue: the housing market remains glutted with inventory. In August, according to NAR, 3.98 million existing homes were for sale in the U.S. – representing an 11.6-month supply at the current sales rate. But those inflated figures may understate the true overhang, Humphries says, repeating a warning issued here in May.


Zillow tracks what it calls “sideline sellers” – “people who may have wanted to sell over the past three to four years but haven’t because of market conditions,” he says.


For the past several quarters, between 6 and 8 percent of homeowners said they’d want to put their house on the market if they saw signs of improvement. While expressed intentions don’t always translate into market activity, Humphries notes that “it does represent a sizable portion of housing inventory waiting in the wings.”

Still, Humphries remains comparatively optimistic that the worst is over. In the near term, over the next three to five years, the housing market “will be challenged through sideways movement, not by a round of large drops.”


While Zillow foresees the housing market finally bottoming toward the end of 2010, it isn’t projecting large gains. Factors such as the large foreclosure pipeline, high levels of negative equity, and the sideline sellers “will constrain the amount of appreciation we’ll see over the next few years.”


Daniel Gross is economics editor and columnist at Yahoo! Finance.

Source: Yahoo Finance


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