Case-Shiller Index June 2012: Home Prices Rise for 3rd Straight Month

By Martin Crutsinger

WASHINGTON -- U.S. home prices rose in June from the same month last year, the first year-over-year increase since the summer of 2010. The increase is the latest evidence of a nascent recovery in the housing market.

The Standard & Poor's/Case-Shiller home price index released Tuesday showed a gain of 0.5 percent from June 2011.

The last time the year-over-year index increased was in September 2010. For much of that 12-month period, the government was offering a home-buying tax credit.

The report also showed that all 20 cities tracked by the index rose in June from May, the second consecutive time in which every city posted month-over-month gains. And all but two cities posted stronger gains in June than May.

Detroit, Minneapolis, Chicago and Atlanta recorded the biggest one-month gains.

"The combined positive news coming from both monthly and annual rates of change in home prices bode well for the housing market," said David Blitzer, chairman of the S&P's index committee.

Jonathan Basile, an economist with Credit Suisse, said improving home prices should boost home sales further in the coming months.

"Persistent news of rising house prices should start convincing prospective home sellers that it's not just a buyers' market," Basile said. "And when Americans become more comfortable with selling their home, they also become more comfortable with buying another one."

The S&P/Case-Shiller monthly index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The June figures are the latest available.

The increases partly reflect the impact of seasonal buying. The month-to-month prices aren't adjusted for seasonal factors.

Still, a measure of national prices rose for the third straight month. Home prices jumped nearly 7 percent in the April-June quarter compared to the previous quarter.

The housing market is making a modest but steady recovery in part because homes are more affordable: Mortgage rates have fallen to near-record lows. Housing prices are about one-third lower than at the peak of the housing bubble in 2006. Those trends have helped lift sales of both new and previously occupied homes.

Sales of previously occupied homes increased in July from June, the National Association of Realtors said last week. Sales have jumped 10 percent in the past year.

Builders are growing more confident after seeing more traffic from potential buyers. Last month they applied for the largest number of building permits in nearly four years last month.

The housing market has a long way to go to reach a full recovery. Some economists forecast that sales of previously occupied homes will rise 8 percent this year to about 4.6 million. That's still well below the 5.5 million annual sales pace that is considered healthy.

Sales have been held back by a low supply of homes on the market and tight credit standards, economists said. Many would-be buyers are having trouble qualifying for loans or can't afford larger down payments being required by banks. A Federal Reserve report last month showed that many banks tightened their mortgage credit standards this summer.

Still, the housing market is steadily improving and is poised to contribute to economic growth this year. Modest economic growth and job gains are encouraging more Americans to buy homes.

Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

Get a Low Rate on Your Loan
See Gallery
Case-Shiller Index June 2012: Home Prices Rise for 3rd Straight Month

On paper it seems like the perfect time to refinance. But wade into the mortgage market, and you may quickly feel as if you're trying to grab a dollar in a game-show booth where the money is blowing around: Those ultralow rates are right in front of you, yet maddeningly elusive.

Lenders, grappling with deadbeat homeowners and shifting regulations, have pared back on mortgage products and upped credit requirements. Still, you have a good incentive to try: If you took out a mortgage two years ago, when rates were in the mid-sixes, you stand to drop your rate nearly two percentage points, saving almost $300 a month on a $300,000 loan. Here's how to navigate the roadblocks.

Quick Links: Search Homes | Check Credit | Local Rates

More From

Nowadays, credit score and equity are king. To land the best rates, you'll probably need a credit score of at least 740, and 20 percent equity. "Banks are looking for reasons not to lend you money," says Mark Miskiel of Lighthouse Mortgage in Sedona, Ariz.

If you don't have 20% equity, a refi isn't out of the question -- President Obama's housing package allows homeowners who owe as much as 105% to receive government-backed loans. To qualify for that program, however, your original mortgage must be held by one of the government-sponsored entities, Freddie Mac or Fannie Mae; you must prove that you can keep up with payments; and you'll get stuck with fees that tack 0.25% to 3% onto your rate.

Home-equity loans and lines have become the enemy of would-be refinancers. Before you can close on a new loan, your home-equity lender must agree to "subordinate" the secondary loan (meaning that your primary lender will get repaid first in the event you run into financial trouble). That can take at least a month, says Bob Moulton of the Americana Mortgage Group in Manhasset, N.Y.

One way to speed up the process is to do a consolidation refi through your home-equity lender. If that's not possible, aim to submit the subordination paperwork as you start shopping for a primary mortgage. And know that other lenders may add up to 0.25 percent to your rate to cash out the secondary loan.

No matter how stellar your credit, you won't get a great rate without doing some serious shopping. That's because every bank is using different standards for underwriting loans, so while you may look like a risky borrower to one, another may welcome you with open arms. In general, says Keith Gumbinger of mortgage data firm HSH Associates, you're likely to get the best rates from small local banks and credit unions.

Unfortunately, if you need a jumbo loan (typically $417,000, but it can go up to $729,750 in high-cost areas), you can kiss those super-low rates goodbye. While jumbos normally run about half a percentage point higher than smaller ones, today the spread is a point and a half.

A point, which equals 1% of your mortgage amount, typically buys you an eighth to a quarter of a percentage point drop in your rate. Today some overloaded lenders are knocking half a percentage point off for those who pay a point, hoping this extra initial cost will deter serial refinancers.

If you're planning to stay put for about five years, it may be worth it. Conversely, consider adding an eighth of a percentage point to your rate to lock it in for 45 days. Banks and lenders are putting a lot more effort into vetting applications, so it can take up to two months to close a loan, vs. about 30 days in the past; you don't want to risk rates' moving against you while you wait. The payoff for patience: a loan you can live with, for a very long time.


See also:
Those Mortgages Blamed for Housing Crisis? They're Back

5 Things That Can Derail Your Home Sale

More on AOL Real Estate:
Find out how to
calculate mortgage payments.
homes for sale in your area.
foreclosures in your area.
Find homes for rent in your area.

Follow us on Twitter at @AOLRealEstate or connect with AOL Real Estate on Facebook.

First Time Buyer Recounts Home Buying Process
Read Full Story

Find a home

Powered by Zillow