Analyst: Slowdown in Home Prices is Good, the Final Stage to Economic Recovery

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By Vittorio Hernandez | August 29, 2014 9:43 AM EST

New houses are under construction in a new subdivision in Golden, Colorado August 28, 2014. The National Association of Realtors said its Pending Home Sales Index, which leads home resales by a month or two, increased 3.3 percent in July to its highest level in 11 months. REUTERS/Rick Wilking (UNITED STATES - Tags: REAL ESTATE BUSINESS)
New houses are under construction in a new subdivision in Golden, Colorado August 28, 2014. The National Association of Realtors said its Pending Home Sales Index, which leads home resales by a month or two, increased 3.3 percent in July to its highest level in 11 months. REUTERS/Rick Wilking (UNITED STATES - Tags: REAL ESTATE BUSINESS)

Despite naysayers crying the stunted recovery of the U.S. real estate market due to a slowdown in home price increase, one expert notes that the slowdown is actually good for the economy.

"Slower home price rises, or outright declines in some markets, are a sign the housing market is starting to move past the boom-and-bust cycle of the last dozen years toward a market where sensible prices driven by local economic conditions prevail," said New York Times senior economic correspondent Neil Irwin.

Irwin said it also signals the end of a "disastrous era for housing." He traced the fall of the housing market from early 2000s, recounting that the market sharply declined due to lax mortgage lending policies and "bubbly prices" that reached its zenith in 2006 and led to the financial crunch, to its post-recession recovery.

The record-breaking home price increase of 2013 lowered mortgage rates and matched prices with long-term fundamentals such as incomes and rental prices.   

"But if the prices were to keep rising at that pace, we might rapidly find ourselves back in a situation in which home prices would be out of whack with incomes and rents. There are signs that key coastal markets like San Francisco and Los Angeles are already inching close to or even past that point," Irwin said.

A statement released by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices revealed that the National Index gained 6.2 per cent in the last 12 months ending June, while the 10-City and 20-City Composite Indices rose by 8.1 per cent. These increases represent a "sustained slowdown" from June's figures, according to the statement.

In June, the National Index rose 0.9 per cent. The 10- and 20-City Composites were up 1.0%.

Among cities, New York posted the highest return with 1.6 per cent. The cities of Chicago, Las Vegas and Detroit finished next with 1.4 per cent.

In December 2013, real estate expert and author Shari Olefson forecast in a Yahoo! Finance interview that the market was about to see signs of a slowdown for 2014. 

"We started off in 2013 real strong but toward the second half of the year we saw things slow down," Olefson said. "We've had almost three years of continuous increases and have now had three months of sales decreases and slowing momentum."

The slowdown could be beneficial to first-time buyers who were priced out before, as well as sellers who are interested in selling their home just as the market has leveled out. Agents and brokers who want to take advantage of these opportunities and would like to beef up their marketing strategies can use virtual technologies and marketing platforms developed by RealBiz Media Group, Inc. (OTCQB: RBIZ).

Realbiz Media is engaged in creating digital marketing technologies centered on video for real estate professionals. According to the company's web site, its client base consists of over 60,000 real estate agents and brokers.

RealBiz Media offers a suite of products and services such as a Television video-on-demand network, a MicroVideo App network, and a Virtual Tour network through its HomeTourNetwork division. It plans to expand its digital video network into more areas to reach over 70 million households in the United States.

In the industry, RealBiz is more popularly known as the creator of NestBuilder Agent, a video-centric agent and listing database, and its Virtual Tour program. 

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New houses are under construction in a new subdivision in Golden, Colorado August 28, 2014. The National Association of Realtors said its Pending Home Sales Index, which leads home resales by a month or two, increased 3.3 percent in July to its highest level in 11 months. REUTERS/Rick Wilking (UNITED STATES - Tags: REAL ESTATE BUSINESS)
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