It was good news/bad news Tuesday in the housing market.
First, the bad news: The monthly Case-Shiller index, a leading measure of U.S. home prices, declined from July to August across a composite of 20 mjaor metropolitan areas, including the Twin Cities area, which dropped 0.3 percent.
The good news: A separate report from the Minnesota Realtors Association found that homes are more affordable than anytime since 1971.
The S&P/Case-Shiller Home Price Index showed home prices dropping from July to August in 15 of the 20 Metropolitan Statistical Areas (MSAs) and in both the 10- and 20-city composites they measure. This one-month decline slowed the annual growth rates in 17 of the 20 MSAs and in the two city composites.
Compared with last year, though, the 10-city composite was up 2.6 percent and the 20-city composite was up 1.7 percent from August 2009. Home prices in the Twin Cities, meanwhile, rose 2.9 percent over that same period, the fifth-highest rate of home price increases year-over-year.
Herb Tousley, director of the Shenehon Center for Real Estate at the University of St. Thomas, focuses less on month-to-month moves than on the year-over-year trend.
“I want to see what September is going to look like,” he said. “Is this just an aberration, a one-month blip? It’s really hard to tell with a one-month decrease. It just bears watching.”
Tousley also questioned some commentators linking the price declines to the end of first-time home-buyer tax incentives last April. “I don’t know if I totally agree” he said, pointing out that prices are still up from a year ago. “Look at year-over-year numbers, the tax credit incentive was there.”
Housing has never been more affordable, according to the Minnesota Association of Realtors Housing Affordability Index, also released Tuesday. The index measures the amount of household income necessary to qualify for a 30-year fixed-rate mortgage on a median-priced home. The association said an index rating of 120 – meaning a household has 120 percent of the income necessary to qualify for a median-priced home — defines an affordable housing market.
In the Twin Cities, the HAI hit 209 in September, the highest level of affordability since the index was created in 1971, according to Christopher Galler, Realtors Association CEO. He said the index has been “at or near all-time highs” the past few months.
The recent July-to-August dip in metro area home prices contributed to increased affordability, Galler pointed out.
“The Twin Cities market swings more than other parts of the state. It goes up faster and goes down harder,” he said, comparing the Metro area with the East and West coasts. “If there are no jobs here, people leave faster,” while other areas of the state see less mobility.