Uptick In US Home Prices, But Wait & See
July 31, 2012
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Home prices across the U.S. inched higher again in May, benefiting from strong buying demand typical of spring and early summer, but the momentum would have to continue into the autumn if a true market bottom is forming, the latest S&P/Case-Shiller Home Price Indices report said.
The average price of a single-family home in May rose 2.2 percent from April levels as measured by both the 10-City and 20-City composites, and all 20 cities surveyed showed month-on-month improvement, the report said. That figure beat analyst expectations for a 0.5 percent rise and was above April's 0.7 percent gain.
As recently as March, home values across the country were still dropping to new lows not seen since the housing market started to collapse in late 2006. But seasonal demand helped buoy prices. Buyers often choose the spring and summer months to make their move ahead of the upcoming school year.
Housing was at the center of the credit crisis that unleashed a full-blown recession in the U.S. in 2008. Many see a bona fide recovery in housing as key for future U.S. economic growth, but the market remains weighed by sluggish demand, high inventories, tight access to credit and a high rate of unemployment.
“We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns,” David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in the report. “However, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall.”
Hole Is Getting Shallower
The annual data still reflected the market’s room for improvement, even if it showed that the hole is getting shallower. Home prices in eight out of the 20 cities surveyed remained lower year-on-year in May, as well as both the 10-City and 20-City composites.
Atlanta was still the worst-performing market, with the average home in that city costing 14.5 percent less in May than it did just a year ago. Other cities including Chicago, New York, Los Angeles and Las Vegas also remained in the red in terms of year-on-year comparisons.
“While still negative, these annual changes are the best we’ve seen in at least 18 months,” Blitzer said.
On the flip side, Phoenix is emerging as an example of recovery. Home values there in May improved 11.5 percent from May 2011 levels, the sharpest annual recovery among the markets surveyed.
Still, Phoenix was one of the hardest-hit cities during the height of the crisis, and home values there still remain more than 50 percent below their mid-2006 peak levels.
All in all, home prices across the U.S. are on average a third cheaper then they were just six years ago.
“The housing market seems to be stabilizing, but we are definitely in wait-and-see mode for the next few months,” Blitzer said.