Home Prices Rise on Seasonal Trends

By:: Peter King | July 26, 2011

Home prices rose for the second consecutive month in May, although the modest gains are being attributed to seasonal factors and not to any underlying improvement in the housing market.

The Standard & Poor’s/Case-Shiller index of home prices in 20 major U.S. metropolitan areas rose 1.0 percent in May, following a 0.6 percent gain in April. However, prices were down 4.5 percent on an annual basis compared to May 2010, compared to an annual decline of 4.0 percent in April and continuing a trend of worsening annual rates of change that has persisted over the past year.

“We see some seasonal improvements with May’s data,” said David M. Blitzer, Chair the S&P Index Committee. “This is a seasonal period of stronger demand for houses, so monthly price increases are to be expected and were seen in 16 of the 20 cities. The exceptions where prices fell were Detroit, Las Vegas and Tampa.”

At the same time, Blitzer noted that 19 of the 20 cites saw prices fall on an annual basis, with Washington, D.C. being the only exception. He said it may be that the gains over the past two months may only be due to the increased sales activity that normally takes place at this time of year.

“We have now seen two consecutive months of generally improving prices; however, we might have a long way to go before we see a real recovery,” Blitzer said. “Sustained increases in home prices over several months and better annual results need to be seen before we can confirm real estate market recovery.”

Prices in the Washington, D.C. market were up 2.4 percent in May, boosting it to a 1.3 percent annual gain since May 2010. Minneapolis posted one of the biggest monthly gains in May, a 2.6 percent rise, welcome news amid an annual price decline of 11.7 percent, worst of the 20 cities in the survey.

Other hard-hit markets include Detroit, Phoenix, Portland and Tampa, all with annual price declines in excess of 9 percent in the current survey, although Phoenix did show a 1.2 percent monthly gain in May.

Aside from Washington, D.C., all metropolitan areas in the 20-city survey showed annual price declines of at least 3.2 percent, with New York, Los Angeles and Boston all at that mark, closely followed by Denver with a 3.3 percent decline.

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