Every week, it seems somebody else is calling a "bottom" in the housing market and this week is no different. On Tuesday, Zillow joined the crowd, reporting its U.S. home value index climbed 0.2% in the second quarter vs a year ago, the first increase since 2007. The index rose 2.1% vs. the first quarter, the strongest gain since 2005.
"It seems clear that the country has hit a bottom in home values," Zillow Chief Economist Stan Humphries said in the report. "The housing recovery is holding together despite lower-than-expected job growth, indicating that it has some organic strength of its own."
So why is this "housing bottom" call different from all the other "housing bottom" calls?
Unlike many (many) other pundits, Humphries had steadfastly resisted the temptation to call a bottom until now, as faithful viewers of The Daily Ticker will recall. (See: Bank of America Pilot Program: There's No 'Silver Bullet Policy' to Fix Housing)
"Generally, we've been more on the bearish side," Humphries tells me in a phone interview. "Our expectation had been a bottom more likely later this year or early 2013. We moved that up based on the assessment of what we saw in the second quarter."
What Zillow saw was strength in the market despite what Humphries calls "not insignificant headwinds" -- most notably a sharp slowdown in monthly job growth and ongoing concerns about Europe's debt crisis and its impact on the global economy.
In addition, the market grew despite a lack of new government stimulus such as the first-time homebuyer tax credit. That "indicated some organic strength that allowed us to believe we're more likely to bottom," he adds.
To be sure, Humphries is cautiously optimistic at best, forecasting a U- rather than V-shaped recovery, with national home prices rising just over 1% in the coming years. His optimism is tempered largely because of the downward pressure foreclosures will exert on prices; still, he's not looking for a "tsunami of foreclosures" and notes investors are eager to buy distressed properties and convert them into rentals.
"We're not going to see a flood of foreclosures but a steady drip over the next 2-to-4 years," Humphries predicts. Investor demand will be "sufficient to absorb the drip of foreclosures."
Again, Humphries isn't making a wildly bullish forecast but it's notable this former bear is now saying housing has finally turned the corner.
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