Home Prices Up, But Significance Questioned

By:
Kirk Haverkamp | July 27, 2010

U.S. home prices rose in May, according to new figures out today, despite declining home sales linked to the expiration of the homebuyer tax credit at the end of April.

May home prices showed an increase of 1.3 percent over April, according to the Standard & Poor’s/Case Shiller index of home values in 20 major metropolitan areas. On an annual basis, prices were up 4.6 percent from May 2009.
 
Even so, the numbers do not necessarily indicate signs of recovery for the housing, according to David Blitzer, chair of the Standard & Poor’s Index Committee. He said much of the gain appeared to be due to strong seasonal factors, and the fact that sales contracted under the tax credit continued to close in May.
 
“While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery,” he said. “Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level.”
 

Market largely flat last 7 months

 
Blitzer said that even though the survey’s annual rates of return for housing prices have continued to improve each month, most of that increase is due to gains that occurred by October 2009. For the past seven months, he said, the market has been largely flat, and June figures for new and existing home sales do not show much sign of improvement.
 
“It still looks possible that the housing market might bounce along the bottom for the foreseeable future, before showing any real improvement that will filter through to the rest of the economy,” Blitzer said.
 
Adjusting the May results for seasonal factors still shows a gain of 0.5 percent, following a 0.6 percent seasonally adjusted gain in April.
 

Most areas show gains

           
All but one of the 20 metropolitan areas covered by the monthly survey showed an absolute increase in prices for May, and 14 of the 20 still showed gains when adjusted for seasonal factors. Las Vegas was the only area to post a decline in absolute prices, showing a 0.5 percent decline.
 
Home values in the three major California metropolitan areas of San Francisco, San Diego and Los Angeles continued to recover from the battering they took in the collapse of the housing markets, posting monthly gains of 1.7 percent, 1.1 percent and 1.7 percent, respectively. For the year, the trio have posted gains of 18.3 percent, 12.4 percent and 9.7 percent, respectively.
 
Minneapolis has also been showing strong gains in home prices, with a 2.8 percent increase in May contributing to an 11.8 percent gain since May 2009.
 
Las Vegas, the nation’s hardest-hit market, continues to struggle, posting a 6.5 percent decline for the year, by far the largest of the seven metropolitan areas showing annual declines in the current survey. Prices in the Las Vegas metropolitan area are now at their lowest level in 10 years, and are less than half of what they were at their peak in late 2006.

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