Home Prices Up in June: Is the Market Stabilizing?

home sales
home sales

The U.S. housing sector received some good news Tuesday -- home prices in 20 major cities rose a better-than-expected 4.2% in June on a year-on-year basis, according to the S&P/Case-Shiller U.S. National Home Price survey. Prices also rose a non-seasonally adjusted 1% in June, from May.

But June's bright spark may represent brief relief for the troubled residential real estate sector -- the data probably reflects some effects of the home buyer tax credit, an expired program that benefited residential buyers who signed contracts before the end of April. Meanwhile, reports show July existing-home sales plunged 27.2% and July new-home sales plummeted 12.4%, the latter hitting a 47-year low.

Hard-Hit Cities Improve

A Bloomberg survey had expected home prices to rise 3.6% in June on a year-over-year basis. Home prices in the 20-city index rose a non-seasonally adjusted 0.5% in May from the previous month (4.6% on a year-over-year basis) and a non-seasonally adjusted 0.4% in April (3.8% on a year-over-year basis).

Meanwhile, the 10-city index also rose a non-seasonally adjusted 1% in June (5.2% on a year-over-year basis), after rising a non-seasonally adjusted 0.5% in May (5.4% on a year-over-year basis).

David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, said June's data was encouraging, but realtors and potential home sellers should keep in mind that the figure, like May's and April's data, likely still contain the effects of the home buyer tax credit.

"The monthly Composites cover June and the national index covers the second quarter, when the government's program for first-time home buyers was winding down. While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead," Blitzer said in a statement. "Even with concerns about near-term developments, we recognize that the housing market is in better shape than this time last year."

"Further, California's cities have moved from some of the hardest hit to three of the four leading cities based on year-over-year gains," Blitzer added. "Among the other hard-hit cities, the news is also a bit encouraging."

The home buyer tax credit, which provided an $8,000 tax credit for first-time buyers and $6,500 for repeat buyers, ended Apr. 30. Given the current mood of austerity in Washington, it doesn't look like there's enough political support on Capitol Hill to renew the credit again.

Key Cities Post Year-Over-Year Gains

Year-over-year percentage price changes in major U.S. cities were as follows: New York, up 0.2%; Chicago, down 0.1%; Boston, up 3.4%; Washington, D.C., up 7.3%; Atlanta, up 2%; Tampa, down 1.6%; Miami, up 1.1%; Dallas, up 1.2%; Denver, up 1.8%; Los Angeles, up 9.2%; San Francisco, up 14.3%; and Seattle, down 1.8%.

Originally greeted by Wall Street with a shrug, S&P/Case-Shiller home price data rose to market-mover status in 2008 as the housing bubble, which was fueled considerably by mortgage market excesses, finally burst.

While real estate's doldrums are far from over, the June data does show that prices are at least not falling universally, despite inadequate job growth during the economic recovery. But tough times remain for the housing sector. Reports released earlier show July existing-home sales plunged 27.2%. And July new-home sales plummeted 12.4% -- a 47-year low.