RealEstateEconomyWatch.com

Just as the volume of concern that the recovery would be short-lived was growing, Case-Shiller reported double digit price increases in all three of its composites, which posted their highest returns in seven years

Prices increased in the 10-City and 20-City Composites by 10.3 percent and 10.9 percent in the year to March with the national composite rising by 10.2 percent. All 20 cities posted positive year-over-year growth.

In the first quarter of 2013, the national composite rose by 1.2 percent. On a monthly basis, the 10- and 20-City Composites both posted increases of 1.4 percent. As of March 2013, average home prices across the United States are back to their late 2003 levels for both the 10-City and 20- City Composites.

Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is approximately 28-29 percent. The recovery from the March 2012 lows is 10.3 percent and 10.9 percent for the 10- and 20-City Composites, respectively.

“Home prices continued to climb,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow

Jones Indices. “Home prices in all 20 cities posted annual gains for the third month in a row. Twelve of the 20 saw prices rise at double-digit annual growth. The National Index and the 10- and 20-City Composites posted their highest annual returns since 2006.

“Phoenix again had the largest annual increase at 22.5 percent followed by San Francisco with 22.2 percent and Las Vegas with 20.6 percent. Miami and Tampa, the eastern end of the Sunbelt, were softer with annual gains of 10.7 percent and 11.8 percent. The weakest annual price gains were seen in New York (+2.6 percent), Cleveland (+4.8 percent) and Boston (+6.7 percent); even these numbers are quite substantial.

“Other housing market data reported in recent weeks confirm these strong trends: housing starts and permits, sales of new home and existing homes continue to trend higher. At the same time, the larger than usual share of multi-family housing, a large number of homes still in some stage of foreclosure and buying-to-rent by investors suggest that the housing recovery is not complete.”

As of March 2013, average home prices across the United States are back to their late 2003 levels for both the 10-City and 20- City Composites. Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is approximately 28-29 percent. The recovery from the March 2012 lows is 10.3 percent and 10.9 percent for the 10- and 20-City Composites, respectively.

The number of cities that showed monthly gains increased to 15. Denver, Charlotte, Seattle and Washington entered positive territory; Seattle and Charlotte were the most notable with returns of +3.0 percent and +2.4 percent. San Francisco posted the highest month-over-month return of 3.9 percent.

All 20 cities showed increases on an annual basis for at least three consecutive months. Atlanta, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, Phoenix, Portland, San Diego, San Francisco, Seattle and Tampa all posted double-digit annual returns. Las Vegas, Phoenix and San Francisco were the three MSAs to increase over 20 percent in March 2013 over March 2012.

In recent weeks the chorus of concern about the recovery and the possibility that it was creating a bubble has grown, especially as prices zoomed in Northern California markets like Sacramento and Stockton.

Last week, Blitzer, who in April said talk of a housing bubble was overdone used the nagging concerns to plug tomorrow’s Case-Shiller release.

“Housing is boosting the economy, but will it last? Recent data point to stronger activity in housing and residential constructions with prices, sales of new and existing homes and housing starts heading higher in recent months. However, household formation, home ownership and employment gains are still mixed. Can the combination of the Fed’ quantitative easing round three (QE3) and private equity firms buying up houses to rent to people who may not be able to qualify for a mortgage be enough to spur economic growth?”

Today’s numbers answered his questions… through March, at least, but others won’t be satisfied. Critics like ForeclosureRadar’s Sean O’Toole point to the disconnect between home prices and income, as in interview he did with me last week.

“In some ways, we are in a less healthy position now than we were in 2007. The bigger surprise to me is that nobody learned anything from that, and instead, we are taking away lessons that are worthless. For example, people point to the fact that we made “pulse” loans in 2007, meaning anyone with a pulse got a loan. That was absolutely the worse time to give anyone a loan, not just somebody who had a pulse. We were lending at unsustainable high prices. Yet, at the bottom of the market, when prices were so low you could have done 100 percent financing to somebody with bad credit and never lost a dime, it was very, very hard to get a loan. The problem with making pulse loans in 2007 wasn’t that people couldn’t qualify, it was that the price was too high.

“But that’s not the lesson we took away. The lesson we took away is that we had to drop prices because we made loans to people who couldn’t qualify. We had to drop prices because they were too high to be sustained by the incomes of the buyers.”

Moody’s Celia Chen says the housing recovery will persist, while shortfalls in supply will keep house prices appreciating at a healthy clip. Her views align with most of her economist colleagues. The most recent Zillow Home Price Expectation Survey, a survey of economists and other experts, found a robust consensus for recovery. The average prediction for appreciation in 2013 was 5.4 percent in the April survey, with the lowest projection at 3 percent depreciation and the highest at 10.1 percent appreciation. This edition of the survey was compiled from 105 responses, including the projections of economists, market and investment researchers and real estate experts.