Based on recently released housing price data, an index of 20 U.S. cities has fallen below forecast in September, highlighting the fragility of an economic recovery. After all, the industry that largely "broke" the U.S. economy should be somewhat healed, if not stabilized, before the rest of the economy can move on.
According to the S&P/Case-Shiller index, property values in 20 cities dropped 3.6% in September compared to a year ago. This comes after a year-over-year decline of 3.8% from August.
18 of the 20 cities in the index showed a year-over-year decline, led by a 9.8% drop in Atlanta. Nationally, prices decreased 3.9% in the third quarter from the same time in 2010. August prices were also revised to show a decline of 0.3% after originally being reported as unchanged.
David Blitzer, chairman of the S&P Index Committee, gave CNBC his view of the situation: "Consumer attitudes have gotten a lot more negative about long-term commitments, and the No. 1 long-term commitment most people in this country made is buying a house."
Market stabilization and silver linings
Reuters reports that the number of U.S. homeowners who are behind on their mortgages decreased modestly in the third quarter, though levels remained high.
Furthermore, the number of properties with amounts owed on mortgages that exceed the actual property value (i.e., negative equity) is dropping. But not by much: From the second quarter to the third, those properties only fell from 10.9 million to 10.7 million. These slight drops, although a positive step, are hardly a drop in the bucket.
"An additional 2.4 million borrowers fell into the near-negative equity camp in the third quarter," promoting concerns of more foreclosures to come.
Yet, despite the depressing sentiment that goes along with foreclosures, some industry professionals are glad to see a race to the finish. "Industry experts say a housing market turnaround isn't likely to occur as long as there remains a glut of potential foreclosures hovering over the market." Meaning an increase in foreclosure activity means a potentially faster revival for housing, explains the Associated Press.
With so much attention on the stability of housing, real estate investment trusts (REITs) will be on everyone's radar.
Below, we list eight REITs with significant short covering (i.e., short-sellers are reducing bets that these stocks are going to decline) over the last month.
Short-sellers seem to think there is greater upside than downside to these rental property owners -- do you agree?
List sorted alphabetically. (Click here to access free, interactive tools to analyze these ideas.)
1. American Campus Communities
2. BioMed Realty Trust
3. CYS Investments
4. Education Realty Trust
6. Home Properties
7. National Retail Properties
8. iStar Financial
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Short data sourced from Yahoo! Finance.
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