Home Prices Show More Improvement

   

Posted: Sep 15, 2009

It's too early to tell whether recent home sale trends are a sign of a long-term recovery in the housing market, but new statistics offer some positive signs.

The Standard & Poor's/Case-Shiller Home Price index for June homes showed that the average price in 20 major U.S. cities had risen to $141,860, up from $139,910 the month before. Prices have now risen for two consecutive months on the Case-Shiller index after largely falling over the past three years.

On a year-over-year basis, the 20-city index recorded a 14.9-percent drop from 2008, although this was an improvement over the record-breaking 19.1-percent year-over-year drop seen in the first quarter of the year.

David M. Blitzer of the Standard & Poor's Index Committee noted the improvement and cited "hints of an upward turn from a bottom," but added that some cities, most notably in the Sun Belt, "show continued weakness."

Eighteen of the 20 metro areas covered in the index saw home prices improve in June.

Still, it remains to be seen if the current progress is sustainable for the longer term. For example, a credit crunch is still largely in place,  restricting home purchases mainly to people with sufficient credit scores. There has also been lingering uncertainty in energy markets and with unemployment figures, although the stock market has continued to trend upward in recent weeks.

Another positive economic indicator came at the end of August in the form of the Conference Board's monthly consumer confidence index, which rose to 54.1 from 47.4, crossing the 50 threshold and reflecting an upswing in overall consumer sentiments. Such optimism could be encouraging to consumers who have been reluctant to enter the housing market up to this point.

Even though real estate values have increased somewhat over the past couple of months, that does little for the many Americans who are struggling with foreclosure.

Recent statistics from the Mortgage Bankers Association (MBA) showed that even as more Americans were applying for mortgages, there was still an upward trend in properties at risk of foreclosure.

According to the MBA, the delinquency rate for residential mortgage loans reached 9.24 percent at the end of the second quarter, which broke the record set during the previous quarter.

"While the rate of new foreclosures started was essentially unchanged from last quarter's record high, there was a major drop in foreclosures on subprime ARM loans. The drop, however, was offset by increases in the foreclosure rates on the other types of loans," said Jay Brinkmann, chief economist of the MBA.

Brinkmann also noted that California, Florida, Arizona and Nevada continued to account for the large majority of overall foreclosure activity, although their share fell from 46 percent in the first quarter of 2009 to 44 percent in the second quarter.

Even for Americans who aren't in immediate danger of foreclosure, there's also the ongoing problem of underwater mortgages that have left millions owing more than their properties are currently worth.