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The Mortgage Corner

We may yet see a spring recovery in real estate. The S&P Case-Shiller Home Price Index shows continued gains for home prices in January, gains that may be accelerating given more recent data on new and existing homes, says Econoday.

Case-Shiller’s adjusted reading for its composite 10 index showed a solid 0.4 percent gain in the month, the second straight 0.4 percent gain. The 20 index shows a second straight 0.3 percent gain. Home prices tend to swing lower in the light demand months of the winter, a factor to keep in mind when looking at the unadjusted rates. Unadjusted data, which the news wires run prominently, show a third straight 0.2 percent monthly decline for the 10 index and a very deep 0.4 percent decline for the 20 index.

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In fact, 8 of the 20 cities surveyed had higher prices over last year. Data through January 2010, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices show that the annual rates of decline of the 10-City and 20-City Composites improved in January compared to December 2009. The 10-City Composite is now unchanged versus where it was a year ago, and the 20-City Composite is down only 0.7 percent versus January 2009. Annual rates for the two Composites have not been this close to a positive print since January 2007, three years ago.

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Any improvement in real estate prices may also help consumer confidence, which improved in March but not by much, at 52.5 vs. a severely depressed February reading of 46.4 (revised from 46.0), said the Conference Board. The 52.5 reading shows little change from the prior four-month average of 51.8. Jobs currently hard to get fell to 45.8, down 1.5 percentage points for the best reading since August and pointing to mild improvement for March’s employment report due on Friday of this week.

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Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumer confidence, which had declined sharply in February, managed to recoup most of the loss in March. However, despite this month’s increase, consumers continue to express concern about current business and labor market conditions. And, their outlook for the next six months is still rather pessimistic. Overall, consumer confidence levels have not changed significantly since last spring."

The looming expiration of the extended home buyers’ tax credit may also help sales. The New York Times reported seeing more sales activity in certain markets.

The number of Des Moines homes under contract in February rose by a third from the January level. The number of pending contracts jumped 10 percent in Naples, Fla., 14 percent in Houston and 21 percent in Portland, Ore.

“These deals will be reflected in the national sales reports when they become final, this month or next,” said the Times. “There is no evidence that prices have begun to move in response to the higher volume. Indeed, so many homes are coming on the market that prices might well fall further.”

We believe that improved incomes and yes, even jobs this year, may mean a more sustained real estate rally. In fact, Barron’s Magazine predicts a whopping 190,000 payrolls job increase on this Good Friday when the Labor Dept. issues its March unemployment report. Its total should be boosted by the 1 million workers just hired for the 2010 population census.

Harlan Green © 2010