February was a milestone in US house markets. For the first time since December 2006, prices were higher than a year ago, according to today's authoritative S&P/Case Shiller Index. But the rise in the 10 City and 20 City indices was just 1%. And as the above S&P chart shows, prices are still only at Q3/Q4 2003 levels, even before adjusting for inflation.
S&P expect further gains in March/April, as buyers rush to beat this week's expiry of the $8k buyer's tax credit. But fears are rising that this $12.6bn programme (like auto scrappage schemes) has only brought forward already-planned purchases and not created much new demand.
Yale University Prof Robert Shiller, co-author of the Index, worries about this, noting that "I do have concern about a double dip" once Federal support is removed. The problem is that 1.1m homes are now in foreclosure, up 20% versus last year. Whilst another 4.8m people are either 60 days overdue on their mortgage payments, or already entering foreclosure - a 30% increase on 2009.
Banks have $2.6trn of mortgage loans on their books, and been very slow to crystallise their mortgage losses. This has caused 'shadow' inventory to build, in addition to those houses publicly advertised via realtors. The Wall Street Journal estimates it would take 9 years to work through published and 'shadow' inventory, at current sales rates.