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Spring buying boosts home prices in U.S. cities
Question of the Day
WASHINGTON — Spring buying pushed home prices up for a third straight month in most major U.S. cities in June. But the housing market remains shaky, and further price declines are expected this year.
The Standard & Poor’s/Case-Shiller home-price index showed Tuesday that prices increased in June from May in 19 of the 20 cities tracked. Prices rose 3.6 percent in the April-June quarter from the previous quarter. Neither of those numbers is adjusted for seasonal factors.
Over the past 12 months, home prices have declined in all 20 cities.
Chicago, Minneapolis, Washington and Boston posted the biggest monthly increases. Metro areas hit hardest by the housing crisis, including Las Vegas and Phoenix, reported small seasonal increases.
Housing has been a drag on the economy and is a key reason it has struggled to recover two years after the recession officially ended. Home sales are on pace this year to be the worst in 14 years.
High unemployment, larger down payment requirements and tighter credit are preventing many buyers from entering the market. Many who can afford to buy are waiting because they are worried prices have yet to hit bottom.
Analysts say home prices have stabilized in coastal cities over the past six months. Seasonally adjusted prices have fallen a modest 1 percent over the past six months, according to the index. That’s less than a third of the decline from the previous six months.
But this year, home prices in many cities have reached their lowest points since the housing market went bust more than four years ago. Prices in Cleveland, Detroit, Las Vegas, Phoenix and Tampa are at 2000 levels.
“These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together,” said David M. Blitzer, chairman of the S&P’s index committee.
The index measures prices compared with those in January 2000 and creates a three-month moving average. The June data is the latest available.
Home prices are certain to fall further once banks resume millions of foreclosures, which have been delayed because of a government investigation into mortgage lending practices. If the U.S. economy slips back into another recession, prices could drop even further.
“There’s no theoretical floor for prices. If the economy worsens, housing will get into a vicious cycle of falling prices and foreclosures,” said Mark Zandi, chief economist at Moody’s Analytics. “When prices fall, confidence wanes.”
Last year, a homebuyer tax credit helped boost prices temporarily. But prices began to fall shortly after the tax credit expired. They tumbled in big metro areas in March to their lowest level since 2002.
As prices have declined, so too have sales.
The pace of sales for previously occupied homes is trailing last year’s 4.91 million sold, the fewest since 1997. In a healthy economy, people buy roughly 6 million homes each year.
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