July Home Value Trends More Encouraging Than Expected; Broader Economic Weakness Likely Won't Show Up Until August Data

Home values edged up into very slight positive territory beginning in May of this year and increased 0.12% from June to July. On an annualized basis, home values fell 5.1% in July (see Figures 1 and 2). The monthly increase in May of 0.01% was the first positive monthly gain at the national level since the onset of the housing recession in June 2006 (58 consecutive months of monthly declines in home values).

As noted last month, it’s encouraging that the first half of the year has seen continued improvement in home value trends in the absence of outside stimulus. Specifically, we’ve seen decreasing monthly depreciation rates and now the first appreciation in almost six years. But the drumbeat of negative economic news received by home buyers beginning in the mid-summer period has already substantially affected consumer confidence (see Figure 4) which, in turn, will affect homebuyer demand. Signs of this impact can already be seen in the declines in both existing home sales (down 3.5% between June and July) and pending home sales (down 1.3% between June and July). Friday’s dismal job report will do little to get buyers worried about the economy off the fence either.

The foreclosure liquidation rate dipped in July with 9.5 out of every 10,000 homes in the country being liquidated in July, down from 10 out of every 10,000 homes in June (see Figure 3). This current pace will undoubtedly pick up if and when the states reach a settlement with banks on their foreclosure practices.