Jul. 12, 2009 - Obama Housing Stimulus - Road to Recovery
There is no question that the Housing Stimulus Package passed by President Obama is working, and produced a "recovery" as to home prices.
Until you ask 5 people who don't agree with one another. That is because everyone answers through their own filter of expectation. Let's study the results in the graph below with regard to King County Home Sales on a Median Price Per Square Foot basis, 2nd Quarter Home Prices vs. 1st Quarter Home Prices.
The market is "supposed to" produce an increase in home prices in the 2nd Quarter of a given year, vs the 1st Quarter. That is not prices going "up". That is a "normal" seasonal variance". Prices UP in the 2nd Quarter is an accurate "expectation" of the marketplace.
To understand the above graph you have to picture yourself pulling a little red wagon. You expect it to go further in a given period of time when you are pulling it downhill or on a flat surface vs. pulling it uphill. You expect it to go further in a given period of time if someone is pushing it from the back vs. pulling it from the back, as you are pulling it from the handle in front.
In 2008, the market was pulling the wagon from the back, trying to get it to go downhill, while the seasonal factors were trying to move the wagon uphill. On a combined basis those forces virtually negated "spring bounce". So much so, that the second quarter prices were only $1 per square foot "up" compared to the first quarter.
To set an accurate expectation for "normal" seasonal variance, I went back to 2001. Exotic loan programs started moving out of control in late 2003. I say this based on previous studies that I have done that show zero down loans beginning in the latter half of 2003. To be safe in my example I went back more than a full year prior.
In 2001 Spring Bounce was a 3% increase moving from $131 per square foot to $135 per square foot. A FULL "market recovery" takes us back to a year before subprime loans, NOT back to "peak" market conditions.
So as to Price Increase/Decrease, the market experienced a full recovery back to the "normal" 3% increase from $188 median price per square foot to $194 in the second quarter, similar to the 2001 pre-subprime movement.
Is that temporary and only due to the $8,000 1st Time Homebuyer Credit? I would have to say that it is. Without the Stimulus Package introduced by President Obama, there is no question but that there would have been fewer home sales in 2009. In my next post we will look at volume vs. price. As to price..."the jury is IN" vs. OUT, and the verdict is FULL recovery as to seasonal price movement.
In my next post we will look at how far we need to go, as to volume, for that recovery to be permanent vs. temporary. Remember on a blog "next" will equal the post above this one, vs. the one below it, since most recent shows at the top.
(required disclosure: Stats are not compiled, verified or posted by Northwest Multiple Listing Service)
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