Home price index climbs in April
An index of home values in the nation’s largest cities increased in April over March after seven months of consecutive declines.
The Standard & Poor’s/Case-Shiller index, a measure closely followed by economists, increased 1.3% month-over-month but was down 1.9% compared with April 2011.
Almost every city managed to post a month-over-month gain. Detroit was the only city out of the 20 followed by the index that fell, down 3.6%.
All of the California cities climbed, with Los Angeles up 1.5%, San Diego increasing 1.4% and San Francisco up 3.4%.
[Updated 7:15 a.m., June 26: Other recent data have pointed to a tentatively improving market. New home sales improved in May, according to data released Monday, and have been steadily rising after hitting a low last year. Last week, research showed builders breaking ground on fewer homes in May but requesting the most permits in nearly four years.
Housing typically shows strength in the spring, and this year’s buying season has been markedly better than last year’s. Housing has received a boost as rock-bottom interest rates and relatively low prices have brought buyers back to the market, helping lift sales. In many regions, demand has outpaced supply, leading to fierce competition among shoppers.
Recently, economists have sounded more optimistic about the state of the housing market, though they remained concerned about the vast number of borrowers who owe more on their homes than those properties are worth.
“I feel reasonably good about housing for the first time in a long time. Inventories are way down, prices are very attractive relative to interest rates, and in 85% of markets it is better to own than to rent,” Richard Green, director of USC’s Lusk Center for Real Estate, said in a statement issued before the Case-Shiller release. “The one problem is that we have more than 4 million homes in the U.S. with upside-down mortgages and we need to figure out how to help them.”
Whether the better sales market can hold depends in part on job creation. U.S consumers also need to be able and willing to take on more mortgage debt.
And while housing may be approaching bottom, the effect of an improving housing market on the broader economy and consumer spending will not be large, economists said.
“The key connection between rising home prices and consumers’ spending is home equity extraction via bank lending,” Ian Sheperdson, chief U.S. economist for High Frequency Economics, wrote in an analytical note on Monday. “That business is not coming back in size anytime soon, no matter what happens to home prices.”]