Home prices in Los Angeles and across the nation are showing signs of life, but it could be a short-lived recovery.
A key gauge of U.S. home prices staged its first quarterly increase in three years and showed prices in the Los Angeles area on the rise for the first time since the local market peaked in September 2006.
The S&P;/Case-Shiller U.S. national home price index, which tracks housing prices across the country, rose nearly 3% in the second quarter compared with the first three months of this year.
The index was still down almost 15% compared with 2008's second quarter, but that was an improvement over the record 19.1% year-over-year decline posted in the first quarter.
"There are hints of an upward turn from a bottom," David M. Blitzer, chairman of the index committee at Standard & Poor's, said Tuesday. "However, some of the hardest-hit cities, especially in the Sun Belt, show continued weakness."
In Los Angeles, home prices ticked up 1.1% from May to June on an unadjusted basis, although they are still down almost 18% from a year earlier. The Case-Shiller index for the L.A. area now stands at 160.90, down from its peak of 273.94 in September 2006. (It was at 100.00 in January 2000.)
Prices rose 3.8% in San Francisco and 1.6% in San Diego from May to June -- the second straight month-to-month increase for both areas.
The second-quarter improvement in the Case-Shiller index was tempered by a report from the Federal Housing Finance Agency that said U.S. home prices fell 0.7% in the second quarter compared with the first quarter of 2009 on a seasonally adjusted basis.
However, that was the second straight quarter during which the FHFA index fell at a slower rate. (The FHFA index is based on data obtained from mortgage lenders Fannie Mae and Freddie Mac. The Case-Shiller index samples a broader range of homes.)
"This is further evidence that prices may be stabilizing for the nation as a whole," said Edward J. DeMarco, the agency's senior deputy director.
Some analysts cautioned that the housing market could be headed for another dip. Several factors, including rising joblessness, looming foreclosures and the Nov. 30 expiration of the $8,000 federal tax credit for first-time home buyers, are all weighing on the outlook for housing.
"We still have a long way to go before we're out of the woods," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. The tax credit "probably pulled a lot of purchases forward that might not have happened until 2010 or 2011, and that demand's not going to be there."
Realtors and home builders are lobbying to extend the tax credit, but it's not clear whether they will succeed. And an unexpectedly robust rise in the consumer confidence index, which the Conference Board said Tuesday rose to 54.1 this month from an upwardly revised 47.4 in July, doesn't necessarily signal an oncoming wave of home sales, Baker said.
Baker also said that many of the second-quarter home purchases were inked when mortgage rates were bottoming out in April. Since then, the rate for a 30-year fixed-rate mortgage has climbed back above 5%.
Although home prices rose in 18 of the 20 metro areas in the report in June compared with May, all of them showed declines compared with 12 months earlier, with 15 of the 20 reporting double-digit drops.
Las Vegas and Detroit were the only two markets to fall in June compared with the previous month. Home prices in those areas were down 54.3% and 45.3%, respectively, from their peaks. The Case-Shiller report singled out Denver and Dallas as two metro areas that have now notched four straight monthly increases in prices.
When adjusted for seasonal sales trends, home prices were up 1.4% in the second quarter nationwide compared with the first three months of the year, according to the Case-Shiller index, which compares the latest sales of detached houses with previous sales and accounts for factors such as remodeling that might affect a house's sale price over time.
Overall, average home prices in the United States in the second quarter were at early 2003 levels. And they were down 30.2% from the second quarter of 2006, when prices peaked nationally.
In a separate report Tuesday, the California Assn. of Realtors said sales of existing single-family homes in the state rose 12% in July from a year earlier to a seasonally adjusted annual rate of 553,910. The inventory of unsold homes fell to 3.9 months, indicating the time it would take to sell the inventory of homes at July's sales rate, down from 6.9 months in July 2008.
The median price of a single-family home rose 3.9% to $285,480 compared with June but fell 19.6% from July 2008. The median price of a single-family home in Los Angeles was $339,430 in July, up 6.1% from June but down 14.1% from July 2008.