NEW YORK TIMES ARTICLE 08-24-2009

Index Shows an Improvement in Home Prices
By DAVID STREITFELD
Published: August 25, 2009

House prices continued to improve in June as a modest spring recovery started to strengthen, according to data released Tuesday.
Standard & Poor’s Case-Shiller Home Price Index showed that prices in 20 major cities increased 1.4 percent during the month, nearly triple the rate of growth in May.
“May’s glimmer of stabilization has held up,” said Maureen Maitland, vice president for index services at Standard & Poor’s. She cautioned, however, that “we need a few more months of progress to start talking about a real recovery.”
Housing prices are still down sharply in comparison to last year’s figures. The 20-city composite index is off 15.4 percent. But this too is a marked improvement from its record loss of 19.1 percent last winter. Average home prices are now at the level they were in early 2003.
The Case-Shiller Index is usually reported without any seasonal adjustments. Since home-buying traditionally is strongest in the spring, that prompted criticism last month that the long-awaited improvements were less than they seemed.
On a seasonally adjusted basis, the index was flat in May. With June’s numbers, there is genuine upward movement, with the index rising 0.7 percent. It was the first increase since January 2006.
Michael T. Darda, chief economist of MKM Partners, called the June report “highly encouraging.”
“The interaction between falling home prices with high household debt loads was the trigger point for the 2007-2008 financial crisis, resulting in both the longest and deepest recession in postwar history,” he wrote in a research note. “Now, though, it would appear that the tide is turning.”
Eighteen of the cities in the index improved in the month. Cleveland rose 4.2 percent from May, Minneapolis was up 3.1 percent and San Diego was up 1.6 percent.
The two cities that declined were Detroit and Las Vegas, among the most economically troubled places in the country. Las Vegas prices are now down 54.3 percent from its peak. Detroit has fallen 45.3 percent.
On a seasonally adjusted basis, the improvement in June was less dramatic but nevertheless real. Fifteen cities saw prices increases, and five saw declines.
“Now that we’re moving out of the seasonal buying period, the question becomes: Is this going to hold up?” Ms. Maitland said.
There is some evidence that the answer is no.
Prices were pushed down last year by an abundance of cheap foreclosures. This spring, fewer foreclosures have prompted bidding wars that have lifted their prices. But with unemployment nearing 10 percent, there are probably many more foreclosures to come.
Some firming in the market is also coming from the rush to buy in advance of the December expiration of an $8,000 first-time buyers’ tax credit.
In addition to helping prices, these factors are also spurring sales. The National Association of Realtors reported last week that existing home sales in July rose for the fourth consecutive month for the first time since 2004. July sales were 5 percent above the pace in July 2008, the first year-over-year gain since the market peaked in November 2005.

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