Home Prices Improving Despite Softening

IRVINE, CA-Learning not to focus on the little blips, but instead to study general trends in home pricing is the key to understanding where the market is going, Peter Muoio, chief economist with Auction.com, tells GlobeSt.com. Muoio cautions not to get caught up in ups and downs over short periods of time, but to look at overarching trends over months or years to get a true sense of how the market is doing.

“We look at all the indexes—Case-Shiller, FHFA, National Association of Realtors and others—and we have the advantage of looking at the price data of the auctions as they're completed,” Muoio says. “The data you're getting from the indexes is the price that was settled upon between the buyer and seller months earlier, the point at which the price of the house is recorded in the county clerk's office. So, when you're looking at home prices, in effect you're looking in a rear-view mirror.”

Auction prices, however, are current, which gives Muoio and his team a better perspective on trends in home pricing. “The softening of various home price indexes is reflecting what we were beginning to see earlier with some of the pullback in prices. This was the reaction to when mortgage rates began increasing in June. The higher mortgage rate means you have more resistance from the buyer on price. There's been some step back from buyers willing to buy at increased prices because the rates have stepped up a bit.”

Another major factor affecting pricing, as GlobeSt.com reported in November, is investor purchases. “Investors have return hurdles that they're looking to make for their buy-to-rent programs, and as prices have run up in the markets, it's difficult to make those returns at those prices,” Muoio explains. “Some market-specific prices we're seeing reflect investor rotation to other markets, so there's more opportunity in those markets.”

Muoio adds that Auction.com's view of the housing recovery would be that it has occurred in fits and starts. “What we're seeing is one of those periods of a step back, but in a general trend of improvements. It's easy for some people to become concerned—and some said prices were bubble-like—but nothing moves in a straight line in the real world, so this is part of the recovery as the market finds itself.”