- The Washington Times - Tuesday, July 28, 2009

Home prices increased in May for the first time since the summer of 2006, according to a widely followed index, providing more evidence that the decimated housing industry finally is beginning to stabilize after suffering its worst three-year stretch since the Great Depression.

Home prices increased in May in 13 of the 20 metropolitan markets tracked by the Standard & Poor’s/Case-Shiller home price index, including Washington, where prices increased 1.3 percent.

Prices also jumped 4.1 percent in Cleveland, 1.9 percent in Dallas, 1.6 percent in Boston, 1.4 percent in San Francisco and 1.3 percent in Denver.

“To put it in perspective, this is the first time we have seen broad increases in home prices in 34 months,” said David Blitzer, chairman of the index committee at Standard & Poor’s, which released its report for May on Tuesday morning. “This could be an indication that home price declines are finally stabilizing.”

The 20-city composite price index edged upward in May by 0.5 percent after declining every month beginning in August 2006. From its July 2006 peak through April 2009, the index plummeted 32.6 percent.

The index also declined 17.1 percent in May compared with the same month last year. April data showed a year-over-year decline of 18.1 percent.

The index now has shown four consecutive months of improvement in annual returns, the report revealed. Before the 12-month rate of decline began to improve in February, the index suffered 16 consecutive months of record annual price declines, beginning in October 2007 and ending in January 2009.

“While many indicators are showing signs of life in the U.S. housing market, we should remember that, on a year-over-year basis, home prices are still down about 17 percent on average across all metropolitan areas,” Mr. Blitzer cautioned. “So we likely do have a way to go before we see sustained home price appreciation.”

Indeed, home prices continued to decline in May in Las Vegas (2.6 percent), Phoenix (0.9 percent) and Miami (0.8 percent). All three markets were devastated when the housing bubble burst three years ago.

The S&P/Case-Shiller index “suggests home prices have at best moderated,” said Alexander Miron of Moody’s Economy.com. “Another increase in [foreclosure-related] distressed sales, which have declined as a share of existing-home sales in recent months, would have a more deleterious effect on house prices and may cause declines to reaccelerate.”

Tuesday’s news arrives on the heels of other favorable housing reports this month. The Commerce Department reported Monday that new-home sales climbed a solid 11 percent in June, advancing for the third month in a row. The National Association of Realtors announced last week that existing-home sales increased 3.6 percent in June, the third consecutive monthly rise. Earlier this month, Commerce reported that housing starts and building permits also jumped in June.

While prices finally have recorded one monthly gain of 1.3 percent in the Washington area, that increase occurred after prices had plunged by 33.4 percent, index data reveal. Similarly, prices had plunged 45.8 percent from their peak in the San Francisco region before rising 1.4 percent in May. In Phoenix, where housing prices continued to fall in May, home values have now collapsed 54.5 percent from their 2006 peak.

Meanwhile, amid widespread reports that the unemployment rate soon will surpass 10 percent from its current level of 9.5 percent, consumer confidence dipped in July for the second month in a row. Declining confidence potentially could reduce household spending and jeopardize the economic recovery that many economists expect to begin sometime during the second half of 2009.

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