US home prices rise for third month
US home prices showed further signs of stabilisation in April, boosting hope that the housing market is finally bottoming out.
The S&P/Case-Shiller home price index, which tracks monthly changes in the value of residential property in 20 metropolitan regions across the US, showed prices edge 0.7 per cent higher on a seasonally adjusted basis.
That followed a 0.1 per cent rise in March and was the third straight monthly gain. On a non-seasonally adjusted basis, April prices rose 1.3 per cent after holding steady the month before.
Even as other parts of the country’s economy are losing momentum, recent housing data have pointed to a tentative recovery.
The sector that was at the centre of the 2008 financial crisis has been hampered by low home prices and high foreclosure rates. While tight credit conditions still mean many homebuyers are unable to make purchases, others view the low mortgage rates as an opportunity to buy.
“While a broad regional variation remains, the fact that some of the areas hardest hit during the housing downturn such as Florida, Arizona and California have seen gains in recent months is a positive sign that the gradual improvement in housing conditions is becoming somewhat broader based,” said Michael Gapen, analyst at Barclays.
Tuesday’s data, which came in above consensus estimates of a 0.4 per cent increase, followed positive new home sales numbers reported on Monday. Sales of new single-family homes rose 7.6 per cent to a seasonally adjusted 369,000-unit annual rate last month, the highest since April 2010, according to the commerce department.
Year on year prices fell 1.9 per cent, the smallest decline since November 2010. This was also smaller than the 2.3 per cent decrease that was forecast and less severe than March’s 2.6 per cent dip.
A rise in prices has been eagerly awaited in the hopes it would tempt more buyers to make a purchase, which would sustain a housing market recovery.
“Based on the sales volumes we have seen, we expected prices to rise although this is a little stronger than what we had forecast,” said David Stiff, chief economist at Fiserv, the financial services provider.
Mr Stiff added that while Americans are more positive about the US housing sector, there are a disproportionate number of investors and cash-only buyers in the market.
“More cautious buyers are still on the sidelines and there are still a significant proportion of homebuyers that are hampered by stricter lending standards. But rising home prices have the potential to fix both of these things. As people and banks become more confident, demand for homes will increase and credit restrictions will loosen,” he added.
According to last week’s existing home sales report from the National Association of Realtors, prices look likely to follow an upward trend as the pool of unsold houses on the market shrinks. There were 2.49m existing homes for sale in May, down from an average supply of 2.93m in 2011 and 3.22m in 2010.
The same NAR report indicated the median price of an existing home climbed 7.9 per cent to $182,600 last month, the highest since June 2010 and up from $169,300 in May 2011.
Of the 20 cities surveyed in Tuesday’s figures, 18 saw increases in annual returns in April. Only Detroit and New York fared worse.
But even as sentiment about the housing sector strengthened, confidence among US consumers declined in June to a five-month low as Americans became more downbeat about the labour market outlook.
The Conference Board, an industry group, said its index of consumer attitudes fell to 62 from a downwardly revised 64.9 in May. Analysts had expected to see a gain of 63.5.
The index is based on consumers’ perceptions of current business and employment conditions, as well as their expectations for the next six months, The index is measured on a scale of 100 pegged to the level of confidence in 1985.
European woes have hurt US sentiment and may point to slow consumption growth in the second quarter.
The risk of a cutback in consumer spending, which accounts for about 70 percent of the economy, led to the Federal Reserve extending Operation Twist – selling short-term bonds while purchasing long-term securities to support the economy. While the Fed noted some “signs of improvement” in the housing market, it still judged the sector to be “depressed”.
The data come ahead of numbers this week that include the latest revision to first-quarter growth data and jobless claims on Thursday and personal income, spending and consumer sentiment data on Friday.