Are Housing Prices Ready for a Rebound?

Late last month the S&P/Case-Shiller housing index was released. The Case-Shiller index tracks housing costs in 20 major metropolitan areas (there is a 10-area composite as well). Between March and April 2012 prices were up, yes up, 0.7%. As compared to the prior year, they were down 1.9%. But that was a smaller decline than the 2.6% decline from March 2011 to March 2012.

Now I’m not dancing in the streets over these numbers. But given housing’s performance over the past four or five years, any increase is a blessing. Add to that continued low mortgage rates, and I’m starting to think that maybe, just maybe, housing is on its way back up.

The index shows an across the board improvement in prices. Nineteen of the 20 metro areas tracked showed improvement. Ten locations saw prices increases. Another nine showed declines, but smaller than in previous months. The only location that showed larger price declines was New York.

And there are other signs of hope as well. A little more than one year ago I invested in an housing industry ETF (iShares Dow Jones US Home Construction Index Fund–Ticker: ITB). At the time the ETF was not doing well, consistent with the housing industry at that time. But I reasoned that the housing market would eventually turn around, resulting in nice gains for ITB.

The investment was in my Scottrade SEP IRA. I purchases some shares in April 2011 and some more in April 2012. In total, I’ve invested $28,403.93. For some time the results were not great. But as the housing market has shown signs of improvement, the value of ITB shares has gone up as well.

Today, the value of my investment is $35,967.38, for an unrealized gan of more than 26%. As I often repeat whenever I talk about investments, the value of ITB could certainly go back down. But its rise signals that many on Wall Street see a housing recover on the horizon.

And for what it’s worth, Warren Buffett believes we’ll see a housing recovery. He thought it would have arrived sooner, but he’s still bullish on real estate.

If you want to know how much your (or your neighbor’s) house is worth, check out these top real estate valuation sites.

So what do you think? Will housing continue its recovery this year?

Published or Updated: November 25, 2012
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Derek says:

    I think it’s possible, but any recovery will be sluggish just like our economy. I fear the inventory levels will remain high with more foreclosures on the horizon, a weak jobs market, and the remaining global debt problems that persist. All of this doesn’t bode well for strong recovery, or any substantial recovery for that matter. Furthermore, the current number of construction workers employed is close to decade long lows, showing that the demand for new buildings is still not there. Nonetheless, I hope we do see a nice recovery, but you may want to consider taking your profits on IBT and get back down to your original investment.

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