US prices rising but still not fully recovered
Residential property prices in the United States are edging up with two leading indices showing rises over recent months.
The latest data from the S&P/Case-Shiller Home Price Indices, the leading measure of US home prices, showed a second consecutive month of increase in prices for the 10 and 20 City Composites. City prices are back to levels last seen in the middle of 2003.
The 10 and 20 City Composites were up 1.1% and 1%, respectively in May compared to April. Sixteen of the 20 MSAs (metropolitan statistical areas) and both Composites posted positive monthly increases, while Detroit, Las Vegas and Tampa were down and Phoenix was unchanged.
On an annual basis, Washington DC was the only MSA with a positive rate of change, up 1.3%. The remaining 19 MSAs and the 10 and 20 City Composites were down in May 2011 versus the same month last year. Minneapolis fared the worst posting a double-digit decline of 11.7%.
‘We see some seasonal improvements with May’s data. This is a seasonal period of stronger demand for houses, so monthly price increases are to be expected and were seen in 16 of the 20 cities. The concern is that much of the monthly gains are only seasonal,’ said David Blitzer, chairman of the Index Committee at S&P Indices.
Figures though from CoreLogic, a leading provider of information and analytics, indicates that the price rises could be more permanent. Its latest data shows that residential property prices in s increased 0.7% in June compared with the previous month, the third monthly increase in a row.
However, on an annual basis national home prices, including distressed sales, declined by 6.8% in June 2011 compared to June 2010 after declining by 6.7% in May 2011 compared to May 2010.
Excluding distressed sales, year on year prices declined by 1.1% in June 2011 compared to June 2010 and by 2.1% percent in May 2011 compared to May 2010. Distressed sales include short sales and real estate owned (REO) transactions.
‘While there is a consistent and sustained seasonal improvement in prices over the last three months, prices are lower than a year ago due to the decline in prices after the expiration of the tax credit last year. The difference between the overall HPI and our index excluding distressed sales indicates that the price declines are more concentrated in the distressed sales market,’ said Mark Fleming, chief economist for CoreLogic.
Other recent housing statistics show that single-family housing starts were up moderately in June, and are at about the same pace as a year ago. Existing home sales were flat in June, reportedly because of contract cancellations and tight credit.
The S&P/Experian Consumer Credit Default indices showed a continuing decline in mortgage default rates since last winter. Other reports confirm that banks have tightened lending standards in the past year, making it harder to qualify for a mortgage despite very low interest rates.
‘We have now seen two consecutive months of generally improving prices. However, we might have a long way to go before we see a real recovery. Sustained increases in home prices over several months and better annual results need to be seen before we can confirm real estate market recovery,’ explained Blitzer.