The National Association of Realtors tried to put a positive spin on the fact that the median house price is up by 1.5 percent year-over-year nationally in the second quarter of 2010. That sounds like good news. But remember, the second quarter included the mad rush to close sales before the end of the tax break. And many of the most depressed markets are getting worse.

In reality, as you dig into the metropolitan area data from the NAR's second quarter, the true picture emerges. Most of those metropolitan areas that contributed significantly to the price increase are still suffering deeply from the downturn in the market. For example the San Francisco area of California was up 25 percent year-over-year, but still down considerably from it's high of $804,800 for a median-priced home in 2007. The median price in the second quarter of 2010 was $591,200. Only those who bought a home in the San Francisco area in 2009 likely have any profit in that home.

The same is true for the San Jose area, with a high for its median selling price of $836,800 in 2007, and a median sales price of $630,000 in the second quarter of 2010. You would have to have bought in 2009 to see any gain. This area contributed a 26 percent gain year-over-year.

So in reality even though both these areas added significant percentage gains to the national average, the truth is that many areas are still suffering. Even if the areas did show a positive gain, will that gain still be there at the end of the third quarter -- with real estate sales almost flat since the tax cut expired? Probably not.
Gains were only seen in the Midwest, up 1.4 percent, and the West, up 2.6 percent. Both the Northeast (down 3.2 percent) and the South (down 2 percent) continued to see significant losses. For example, even though the Cape Coral/Fort Myers area of Florida did see a 12 percent gain over its 2009 prices, the median price for a home in 2007 was $252,100 compared to $94,100 in the second quarter of 2010. Even someone who bought a home in the third quarter of 2009 would be sitting on a loss. The median price for that quarter was $98,000, so the area is clearly showing signs of a double dip.


Even the chief economist for the NAR, Lawrence Yun, cautions, "Prices in some areas remain below replacement construction costs, so even with an elevated supply of existing homes on the market we don't expect any consequential movement in home prices for the foreseeable future."

He does try to add some optimism, "The recorded home prices in many markets were significantly depressed last year because of a large percentage of distressed homes sold at discount. Now as more normal, non-distressed home sales are occurring, the median price in many areas is showing higher values."

But how long will that be true, especially in the hard-hit areas? Bank repossessions increased year-over-year for the eighth straight month, according to RealtyTrac's July 2010 U.S. Foreclosure Market Report. More than 135,000 foreclosure auctions were scheduled in July, which is an increase of 2 percent from the previous month. But at least this number is down from its peak of 158,105 in March 2010. As these repossessed houses hit the marketplace, expect depressed sales to again put downward pressure on house prices.

We won't see any true improvement in house prices until we see significant improvement in the job market. No matter how good the deals are out there, until people get jobs, they can't buy a house.

Lita Epstein has written more than 25 books, including The 250 Questions Everyone Should Ask About Buying Foreclosures.


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