Home price data may be misleading, analysts say

The affordability of housing in the U.S. has reached a 40-year high, according to a recent analysis.

Based on the Fiserv Case-Shiller Indexes and data from the Federal Housing Finance Agency, analysts report that home prices in the fourth quarter of 2011 were unchanged or improved year-over-year, indicating the market is becoming more stable post-recession. Although the national average price in the wake of the economic downturn has fallen to a new low for single-family homes, declines are slowing.

An additional drop of nearly 1 percent is predicted by the end of this year by Fiserv analysts, who indicated that focusing too much on prices would be a mistake. Fundamentals such as home improvement spending, sales of existing properties and other metrics have been recovering since last year, they say.

Recovery during the middle of this year will be driven largely by investor activity, according to the report, as the real estate sector’s low-cost markets draw interest. Mortgage data fails to account fully for this, and so may indicate the market is weaker than it actually is. Growth is expected to be localized, to an extent, in some of the hardest-hit markets. These areas may be ripe for rental conversion of single-family homes, which investors can then have operated by property management companies.