Home Prices Rose for Seventh Straight Month in December

The U.S. housing sector's long, slow journey to health continues: Home prices rose on average for the seventh straight month, up 0.3% month-to-month in December on a seasonally adjusted basis, according to the S&P/Case-Shiller 20-city survey, the Associated Press reported. The index rose 0.2% in November and 0.3% in October.On a year-over-year basis, the 20-city home price index was down only 3.0% in December, the AP reported, or slightly better than the 3.1% drop forecast by economists surveyed by Bloomberg News. That's an improvement from the 5.3% year-over-year price drop recorded in November.

"As measured by prices, the housing market is definitely in better shape than it was this time last year, as the pace of deterioration has stabilized for now. However, the rate of improvement seen during the summer of 2009 has not been sustained," said David M. Blitzer, chairman of the Index Committee at Standard & Poor's, in a statement.

Year-over-year percentage price changes in major U.S. cities were as follows: New York, down 6.3%; Chicago, down 7.2%; Boston, up 0.5%; Washington, D.C., up 1.9%; Atlanta, down 4.0%: Miami, down 9.9%; Dallas, up 3.0%; Denver, up 1.2%; Los Angeles, unchanged; and San Francisco, up 4.8%.

Originally greeted by Wall Street with a shrug, the S&P/Case-Shiller home price index rose to market-mover status in 2008 as it became clear that the United States' decade-long housing boom had, in fact, been a bubble fueled considerably by mortgage-market excesses. The bursting of that bubble triggered record numbers of home mortgage foreclosures and defaults on mortgage-backed securities (the now-infamous "toxic assets"), which led to the financial crisis that the U.S. and world are still trying to recover from today.

A Firming Housing Market

Case-Shiller has provided another encouraging report, but even so, investors -- and certainly potential home buyers -- shouldn't become overly bullish: Home inventories remain high, and prices could start to fall again at any sign of weakness or a stall in the U.S. economy. If the trend of rebounding home prices is to continue, the U.S. will have to see job growth soon: Higher employment levels lead to an increase in household formation, which historically has been a major catalyst for home-price gains.
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