Home-price index in 20 cities rises as buyers rush to obtain tax credit
An index of home prices in 20 major cities gained ground in April. But analysts warned that prices are likely to fall again as the effects of a popular federal tax credit for buyers begin to wane.
Prices of previously owned single-family homes rose 3.8% in April compared with April 2009, according to the Standard & Poor’s/Case-Shiller index of 20 metropolitan areas, a closely watched index of home prices. The 20-city index was also up 0.8% from March, the first monthly gain after six consecutive months of decline.
California cities continued to appreciate, according to the non-seasonally adjusted index, with Los Angeles and San Diego up 0.7% in April and San Francisco up 2.2%. San Diego has shown 12 consecutive months of improvement.
Other cities that gained in April included Dallas, 2%; Atlanta, 1.8%; and Denver, 1.7%. Miami fell 0.8% and New York was down 0.3%.
But David M. Blitzer, chairman of the index committee at Standard & Poor’s, warned that any gains were probably largely attributable to a rush of buyers taking advantage of the federal tax credit program that offered incentives of up to $8,000 for some home purchasers. Because the index combines data from three months’ worth of sales, including April, it probably captured the run-up in home-buyer demand as the credit neared its expiration.
“Other housing data confirm the large impact, and likely near-future pullback, of the federal program,” Blitzer said. “Consistent and sustained boosts to economic growth from housing may have to wait to next year.”
To qualify for the credit buyers had to sign contracts by April 30 and close their deals by June 30. Sales of previously owned homes -- which make up the majority of the U.S. housing market -- began to wane in May. Although some experts expect a final, strong month of home resales in June as buyers rush to close their deals before the Wednesday deadline, activity is largely expected to fall off after that. Sales of previously owned homes are recorded when a deal closes escrow.
Congress is hoping to extend the deadline to close on a home by three months, to September 30. The extension would apply only to those buyers who signed a purchase contract before April 30. The House of Representatives passed a measure to extend the deadline Tuesday, and it will now go to the Senate, where Democrats have sponsored a similar measure.
One pessimistic indication of where the market for resold homes might be headed came last month as the Commerce Department reported that May new-home sales fell a record 33% from April.
Cameron Findlay, chief economist at LendingTree.com, said the April gains in the Case-Shiller index also reflected a rebound from a bottoming of prices a year earlier.
“It’s not so much that we are doing so good this year, it’s just that things were that bad back then,” Findlay said. “And it’s not just a national improvement, it is in specific target areas where we are seeing some growth.”
He said he was “shocked” to see California cities doing so well, given the high rates of unemployment, delinquent borrowers and homes that are “underwater,” meaning borrowers owe more on their mortgages than what their homes are worth.
Adjusted for seasonal variations, the 20-city Case-Shiller index was up 0.4%. But Standard & Poor’s has warned that the index’s adjusted version is no longer a reliable gauge of prices because of distortions caused by the economic crisis.
alejandro.lazo@latimes.com
