Category: Market Observations
Posted: 4/7/2012
Home prices down, but how much further can they go?
By John Dixon
As I mentioned in my last post, I think the real estate market is finally beginning to level off. We’re seeing this in our auctions, where we’re seeing more bidders and more aggressive bidding.

Don’t get me wrong: Prices are still low. One of the best indicators of that is the S&P/Case-Shiller 20-city composite index, which is a three-month rolling index of home prices. While it only covers home prices, it’s a good proxy for the health of the real estate market. The latest numbers showed a drop of 3.8 percent in home prices over the past 12 months, even as the general economy has strengthened.

In fact, the index showed home prices at their lowest level since early 2003. That tells me the excesses of the bubble we saw in the mid 2000s have been wrung out of the market. When risk was at its highest -- before the credit and real estate crisis -- investors were clamoring to buy just about everything in sight. In hindsight, it was a terrible time to be aggressively buying.

Now, the risk is as low as I’ve ever seen it.
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