Housing Market Is In Better Shape Than This Time Last Year, But For How Long?

This morning, the new S&P/Case-Shiller Home Price Indices shows that the U.S. National Home Price Index rose 4.4% in the second quarter of 2010, after having fallen 2.8% in the first quarter. This is relatively good news, but will it last?

More recent data from the National Association of Realtors shows existing home sales crashing 27% in July — and this is the high season for home sales. Once winter sets in, we expect the Case-Shiller data to take another hit.

Moreover, 82.3% of mortgage applications are for refinancing rather than new purchases. This isn’t helping draw down the excess housing supply. As we all know, when supply goes up, prices go down.

Nationally, house prices are back to their Autumn 2003 levels (See Chart). Let’s see where they are at the start of next spring.