Home prices double dipping; rents climbing up
The Standard & Poor’s/Case-Shiller index of property values measures home prices in 20 major U.S. cities. The index numbers for February have just been released, and home prices are once again dropping. At the same time housing prices are facing a double-dip, rental prices seem to be going nowhere but up.
Dip in home prices
The February 2010 index of home values measured average home prices and inventory in 20 major U.S. cities. Compared to January of 2011, home prices dropped by 0.2 percent. Compared to February of 2010, home prices dropped by 3.3 percent. The raw numerical index for February 2011 was 139.27. The lowest number the home price index hit during April of 2009 was 138.26. In short, home sale prices are dipping down to close-to-record lows. This double dip is eroding the gains in home prices that have been made during the economic recovery.
Putting home prices in perspective
The specter of a double-dip in housing prices puts many industry watchers on edge. Comparing average home prices and the Case-Schiller’s 110 years of home price data puts this information in better perspective. Between 1915 and 1949, between World War I and World War II, home prices remained between 75 and 81. After World War II, home prices jumped from a low of 70 to 110 and continued an uneven climb. Between 1998 and July 2006, home prices jumped from 109 to almost 210 with the increased availability of short term loans and other financing options. In short, this 3.3 percent drop continues to put home prices closer to what the trend appeared to have been, rather than below it.
Rent getting expensive
In the last three years, rental vacancy rates have been holding steady at about 10 percent. In the last few months, rental vacancy rates have started dropping severely. Between the first and last quarter of 2010, rental vacancy rates dropped from 9 percent to 7.9 percent. Rental experts estimate that average rent in the United States will spike by double-digit numbers, and top $800 per month. Lower vacancy rates and a higher cost of purchasing a house, thanks to 20 percent down payments, make rentals more expensive. In short, paying for a place to live is going to get more expensive.