US, Ireland, and Italy: Quick Survey of House Prices and Sales

The recent data suggests the US and Irish housing markets are stabilizing, while news from Italy has been poor.

The April reading from S&P/Case-Shiller showed a 1.9% year-over-year decline in property prices. This is the smallest decline since late 2010 and was a smaller decline than the 2.5% expected by the consensus. New home sales reported yesterday are at their highest level since before the crisis. Vacancy rates of single and multi-family units are falling. It is not that the housing market is going to offer the US economy much of a lift, but the fact that it will not be much of a headwind is itself a positive development.

The National Association of Realtors estimates there were 2.49 mln existing homes for sale in May, down from 2.93 mln average last year. It found that the median price of existing homes rose 7.9% last month to $1.82.6k, which is the highest since mid-2010.

Ireland has also reported good news. House prices rose 0.2% in May. It is the first monthly increase in several years. Prices are still 15.3% below year ago levels. In April, house prices fell 1.1% for a 16.4% year-over-year decline.

House prices in Dublin rose 0.2% for the third consecutive monthly increase. Prices are still 57% below the early 2007 peak. House prices from other parts of Ireland rose 0.1% in May.

Some calculations by the central bank, based on income and other factors, suggest that house prices in Ireland may have overshot to the down

side by 12-26%.

We have argued that one of the reasons Italian banks were in a better shape that Spanish and Irish banks is that they were not suffering the after effects of a housing market bubble. While this remains true, at the end of last week, Italy reported the sharpest drop in home sales in eight years. There was a 20% decline in Q1. While the economic contraction and rising unemployment are the main culprits, the new property tax cannot help.

The tax was approved at the end of last year and PM Monti expects it to raise around 21 bln euros. The first payment is due this month. It is the first time in four years that primary residences are being taxed in Italy.