Home Prices Post May Gains, but S&P Sees No Sustained Recovery
By: Carrie Bay
Home prices in the United States rose in May on both a month-over-month and year-over-year basis, Standard & Poor’s reported Tuesday.
The S&P/Case Shiller 20-city home price composite increased 1.2 percent between April and May. The 10-city composite reading was up 1.3 percent.
Annual growth rates were even stronger. The 20-city composite climbed 4.6 percent compared to May 2009, while the 10-city rose 5.4 percent.
The gains posted in the latest installments of the closely watched indices were much larger than the market expected, but analysts warn that the plus-signs are only making a temporary showing, reflecting a strong spring selling season and the residual effects of the homebuyer tax credit.
“While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s.
Blitzer says that since reaching its recent trough in April 2009, the housing market has really only stabilized at the lower level. He argues that more recent statistics on June’s existing and new home sales, as well as housing starts, are nothing to write home about.
“It still looks possible that the housing market might bounce along the bottom for the foreseeable future, before showing any real improvement that will filter through to the rest of the economy,” Blitzer said.
Economists across the country are echoing Blitzer’s concerns.
In commentary released to DSNews.com on the latest S&P/Case-Shiller readings, the chief U.S. economist at IHS Global Insight, Patrick Newport, said, “We expect [home prices] to rise for another two months, but then start to decline. In our view, the housing glut and foreclosures will drive the national Case-Shiller index down another 6 to 8 percent, with prices bottoming in 2011.”
Some 60 percent of real estate experts and economic strategists surveyed earlier this month by the analytics firm MacroMarkets LLC, which was founded by Robert Shiller, one of the creators of the Case-Shiller Home Prices Indices, forecast extended home price declines for the remainder of 2010.
Based on data from the May indices bearing Shiller’s name, the cities of Minneapolis and Atlanta led the way in month-to-month gains, up 2.8 percent and 2 percent, respectively. All but one of the 20 cities tracked for the study were in positive territory – all except Las Vegas, where home prices dropped another 0.5 percent in May.
Looking at the annual numbers, Las Vegas again was the biggest downer. There prices posted a 6.5 percent decline compared to May 2009. San Francisco recorded the largest year-over-year gain of 18.3 percent.
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