U.S. home prices in June posted their first year-over-year increase in nearly two years, according to a widely watched index released on Tuesday, as more buyers chased fewer homes on the market.
U.S. home prices ended the second quarter with the first positive annual growth rates since the summer of 2010, according to Standard & Poor’s Case-Shiller indexes. Nick Timiraos has details on Markets Hub. Photo: Bloomberg.
ReutersSale prices of U.S. homes were up in June, the S&P Case-Shiller indexes showed Tuesday.
The S&P/Case-Shiller index of 20 major metropolitan areas showed home prices rose by 0.5% in June, compared with a year ago, to end a 20-month streak of declines. Home prices are still down by nearly 31% from their 2006 peak but have returned to mid-2003 levels.
A separate national index released by Case-Shiller said prices were up by 1.2% from a year ago and by 2.2% from the first quarter, on a seasonally adjusted basis. The quarterly gain was the largest since late 2005. “This is a clear trend now. We have had a very strong spring season,” said Mark Fleming, chief economist at real-estate data firm CoreLogic Inc.
Tuesday’s report follows several others that had pointed to an exceptionally strong bounce in sales this spring. The rebound began to take hold months ago, as the number of homes for sale dropped sharply, especially as banks have listed far fewer foreclosures. In addition, some traditional sellers are holding out for better prices or are unwilling to sell because they owe more than their homes are worth.
At the same time, investors have been aggressively scooping up bargain-priced foreclosures that can be converted into rental properties, while low mortgage rates are giving buyers even more purchasing power.
In each of the past three years, home prices have picked up in the spring and summer only to erase those gains in the fall and winter, when sales activity slows. But economists said there is a better chance the low inventories of for-sale homes and stronger demand could prevent prices from dipping below their previous lows.
“We have a much better supply-and-demand equilibrium right now,” said Mr. Fleming. Compared with previous years’ false dawn for housing, “we’re much closer to the level of supply matching the albeit-muted level of demand,” he said.
The report showed that price gains were increasingly broad based, though not every part of the country is benefiting. Of 20 tracked cities, 13 posted year-over-year increases, compared with just seven cities three months ago. Prices in Phoenix were up by 14% from a year ago, continuing a sharp turnaround for the hard-hit market. Prices were below last year’s June level in six markets; the worst was Atlanta, which was down by 12%.
Since prices began falling in 2006, they had previously posted year-over-year increases briefly in 2010, when home buyer tax credits fueled a burst of sales activity.
The housing market still faces stiff headwinds, including tight lending standards, an economy that isn’t producing large job or wage gains, and high levels of homeowners who are underwater, or owe more than their homes are worth.
Many economists say the recent price gains aren’t likely to be sustained at the current pace. Instead, the sharp bounce may reflect the fact that prices in some parts of the country fell so far that they created unusually attractive deals. Some industry executives fret over why demand isn’t higher given the low level of mortgage rates.
Another concern: While low inventory has helped push prices higher, it also has begun to crimp sales volumes, particularly in Western markets such as Phoenix, Las Vegas and Sacramento, Calif. Some economists say sales of previously owned homes could fall in the coming months, in part because there aren’t enough homes for buyers to choose from. That could lift sales of newly built homes.
“To see real sales-volume gains, you’re going to need to see more opportunistic sellers,” said Glenn Kelman, chief executive of real-estate brokerage Redfin. “The only people selling are those who are bursting at the seams because they had a third baby or because they took a job out of state.”
Jillian Holliday has no plans to move out of the house that she bought and renovated in Orlando last October, but that hasn’t stopped her from trying to purchase nearby properties that could be fixed up and resold for a profit. She and her father offered to pay $230,000 for a tidy 1920s-era home in downtown Orlando the day it went on the market in April.
“There’s almost nothing for sale in this neighborhood,” said the 30-year-old recruiter. “And the houses you do see sell really quickly.” The home is being sold as a short sale, where the seller must receive the bank’s approval to sell at a loss. The last buyer walked away from the property after spending eight months under contract. Ms. Holliday hopes the sale will close by September. “It’s such a gem,” she said.
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