May 31, 2011

Economist: Decline in Housing Prices Not Surprising

The decline in home prices is not surprising. Credit is tight, economic growth is slowing, unemployment is still high, and Dodd-Frank, once implemented, will likely make a bad problem worse.

The May Chicago PMI that was released this morning came in at 56.6, which is below expectations of 62.0, and down from 67.6 the month before.  This is the worst monthly drop since the economy tanked back in October 2008 and the second largest cumulative two month drop since 1980.

Because conforming loan limits are due to decline, we could see a rise in home sales, and maybe home prices, this summer as households and investors scramble to beat the conforming loan limit.  But that will be a short-lived blip, much like the Administration’s tax credit.

More of Anthony Sanders thoughts on the Case Shiller Index can be found on his blog.