Housing Prices Bottom, But Not for Everyone

(MoneyWatch)  In the depressed world of American real estate prices, "down 17.1 percent from a year ago" is good news. That's how much the May S&P/Case-Shiller numbers, an index of housing prices in twenty major cities across the U.S., had declined when they came out yesterday. Yet today's headlines, you'll see, are all about "a housing recovery." That's in part because of the 20 cities covered, prices rose in 14 of them. It's worth noting that Jim Cramer, who I often love to kick around, called this one.

This is great news for the economy. However, I'm feeling like a Debbie Downer today. So let me point out that if you're a professional with a robust (at least by relative standards) income, it doesn't help you a whole lot. That's because the recovery that the stats are showing seems to be in the lower end of the market. Case-Shiller is an index, so it doesn't have median prices, but let's take San Francisco as an example. The median price in the East Bay/San Francisco area was $402,000 in the first quarter of this year, down from $701,700 the year before, according to National Association of Realtors numbers reported by our S.F. real estate blogger pal The Front Steps. It isn't that prices plunged, though they did drop. It's that the mix changed. The real estate sales that are happening are mostly at the low end of the market.

My colleague Ilyce Glink has made the persuasive argument that recent housing numbers show the $8,000 first-time homebuyer tax credit is working. Sure, it's helping, but that credit phases out at $75,000 per individual and $150,000 per couple, which means if you're a dual-income couple living and work in an urban area, you're probably too "rich" to take advantage of it. Oh, and did I mention that this quoted Case-Shiller index doesn't include condos or co-ops? So for a place like Manhattan, where I live and work, it's pretty much useless.

What drives the housing markets on the "higher" end -- say in my city, where three-bedroom condos go for between $2 million and $3 million -- is mortgage money, and above the current conforming loan limit of $729,750, there's very little. In fact, I think it's been a year since I saw a transaction with a mortgage of more than a million dollars. The volume of sales has slowed to such a trickle that it's tough to even know how to price things in the upper echelon. But I think it's safe to say -- at least in the niche of coveted, big-city, short-commute-to-work apartments -- that credit is still crunched, and so we haven't seen our "recovery" yet.

Read More:

• Housing Price Index: Market Bottom Is a Long Way Off
• How about a $15,000 Tax Credit for All Buyers, Even Millionaires?