Today’s BBC headline, US home sales see surprise rise, might make you feel optimistic about the house market.  However this unexpected rise in sales in December was triggered as buyers took advantage of much lower house prices.

There are many more headlines on that aspect of the market.  CNN tells us that home prices are falling at a record pace:

The S&P Case-Shiller Home Price Index, a sampling of 20 cities from across the nation, fell a record 18.2% over the 12 months ended Nov. 30. That brought the index to its lowest point since February 2004. From its peak in mid-2006, the index has plunged a whopping 25.1%.  Eleven of the 20 cities showed record declines, and the 12-month price drop for 14 of the cities was a double-digit percentage.

It is the same story in the UK where house prices fell 8.6% year-over-year in November according to the Department for Communities and Local Government (DCLG).

A similar picture is occurring in Canada particularly in the West.  Statistics Canada reported that the year-over-year decrease recorded in Edmonton (7.9%) was the largest since May 1985, while the drop in Calgary (2.5%) was the largest since November 1991.   Across the country, only Vancouver (2.3 %) and Victoria (2.4 %) also registered year-over-year declines.

The bad news is continuing.  Vancouver house prices fell 6% in the fourth quarter according to a survey released by Royal LePage Real Estate Services.

With such big declines you might wonder whether the market is close to bottoming out.  However economists seem to be agreeing that further declines are still in the cards.  Neal Soss, chief economist at Credit Suisse Holdings in New York, opines, “The housing market has not yet reached its bottom.  People have to be in a position where they are not afraid of their most significant asset.”  Joe Schapiro, chief economist of MFR Inc. suggests it is unlikely that we are anywhere near the bottom in nationwide home prices.

Given that governments are only now doing what may be needed to turn the recession around, there is no reason for any quick reversal in home prices.  Unless you are one of those snapping up bargains with available cash, the best advice is undoubtedly to sit tight.

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