Thursday, August 27, 2009

Home Prices in Major U.S. Cities Rise for a Second Month

From the Wall Street Journal:

Home prices


Home prices in major U.S. cities rose for the second straight month
in June in the latest sign the housing market may be steadying after
years of declines.


The S&P/Case-Shiller index for home prices in 20 major cities in
the three months ended June 30 was up 1.4% from its level in the three
months ended May 31. It was the first time the index rose two months in
a row since mid-2006. Prices gained in 18 of 20 markets, but were still
down 31% from their July 2006 peak.


"Momentum matters," said Robert Shiller, the Yale University
economist who helped create the index. "This is a sudden break in
momentum."

The
hint of improvement in housing and the broader economy was underscored
in a separate report Tuesday showing consumer attitudes improved in
August after two months of decline. The Conference Board's
consumer-confidence index rose to a level of 54.1 in August, just shy
of the 54.8 level reached in May.

One component of the index, consumer expectations of where the
economy will be in six months, rose to 75.8, its highest since the
recession began in December 2007. Consumers' assessment of present
conditions also improved, along with stepped-up plans for buying homes,
autos and several major appliances.


Economists and real-estate professionals warn that a recovery in
housing is likely to be bumpy: Home prices could drop again as job
losses drive foreclosures higher. "It really is too soon to call this
as a turning point," Mr. Shiller said, recalling a slowdown in price
declines in early 2008 before the deteriorating economy sent housing
back into a tailspin.


[US home prices]

A
narrower Case-Shiller index of home prices in 10 major metropolitan
areas is down 15.1% for the last 12 months and down 5.5% so far this
year. Government officials used that measure when modeling their
assumptions for stress tests to gauge the health of U.S. banks earlier
this year. Under a baseline scenario, officials predicted declines of
14% for 2009, while an adverse scenario forecast a 22% drop.


A separate price gauge calculated by the Federal Housing Finance
Agency, which uses sales price information on mortgages owned or backed
by government-backed mortgage investors Fannie Mae or Freddie Mac,
showed that prices increased 0.5% in June from May.


Meanwhile, sales of existing single-family homes in California
increased 12% in July from the same time a year ago, the California
Association of Realtors said.


Recent home-price gains have been driven, in part, by competition
between first-time buyers and investors offering to pay cash for
distressed properties. Demand also has been boosted by government
intervention that helped drive mortgage rates to half-century lows in
the spring and a tax credit of up to $8,000 for first-time home buyers.


Stefan Nissen, a 34-year-old emergency-room nurse, and his wife, a
schoolteacher, are buying a three-bedroom home in Novato, Calif., a San
Francisco suburb. The home is selling for around $500,000 in a short
sale -- a transaction in which the sales price falls short of the
mortgage balance owed by the seller. "We actually looked to buy two
years ago and could not get into anything in the area," said Mr. Nissen.





Still,
headwinds remain. Mortgage defaults and foreclosures aren't likely to
peak until unemployment ebbs. The rate of 90-day delinquencies on loans
owned or guaranteed by Freddie Mac rose to nearly 3% in July from 2.8%
in June and 1% in July 2008. While rising demand has helped soak up
foreclosure inventory in several hard-hit markets, rising mortgage
defaults have fueled concerns among real-estate professionals that the
supply of new foreclosures could jump later this year.


"The government has not yet handled the foreclosure problem," said
Mr. Shiller. The success of efforts to stave off foreclosures by
modifying mortgages and the firming of demand for homes will determine
whether the gains in home prices last.


Las Vegas and Detroit were the only markets that saw monthly price
declines in June. Home prices in Las Vegas have dropped by 54.3% from
the August 2006 peak, moving ahead of Phoenix, which is down by 53.9%
from its June 2006 peak.

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1 comments:

CoachingByPeter August 27, 2009 at 9:41 PM  

Rent-to-own home is another good option in purchasing a house especially if your funds is not that sufficient for a downpayment and monthly mortgage. Just be open with the seller on some conditions on your contract so that both will have the advantage on the set-up.