OK the Case Shiller house price data is out today (for May). Last months data I pointed out an emerging trend.
"5 cities that did not have a big boom, the change in prices was basically 0 over the last 2 months (with a range of -2% to +1%, while in the boom cities the average was -3.8% (range -1% to -7%). Clearly a significant difference, both statistically and practically speaking. So the recent trend is that in the non boom cities prices are almost stable despite the rising unemployment while in the cities which had booms the price falls are slowing but still there. "
Let's see now looking at the last 2 months if this trend is becoming clearer or was merely a statistical blip. 5 cities that did not have a big boom, the change in prices averaged 1% up over the last 2 months (with a range of -1% to +3%) while in the boom cities the average was -1.7% (range 1% to -7%). So for non boom cities prices do appear to have stabilised while for the boom cities prices continue to fall but that rate of price decrease has slowed significantly compared to 3-4 months ago.
So what does this mean? Well it's probably not too bad a time to buy a house in the non boom cities. However most banks exposures to bad loans are in the boom cities and these are still falling though at a slower rate.
There has been some discussion amongst bloggers about problematic Option ARM loans and when they are likely to default. This discussion has centred on recast and rest dates when payments or interest rates change for these loans. See http://www.calculatedriskblog.com/search/label/Option%20ARM for a summary of Option ARM posts on the excellent calculated risk blog.
As I pointed out in my last post default decision are likely in most cases to depend upon changes in personal circumstances. So defaults are likely to be spread over time rather than bunched according to rest or recast dates. This is what appears to be happening now see http://www.calculatedriskblog.com/search/label/Option%20ARM. US banks face a long hard road ahead.