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Crisis In The Housing Market
Wed June 29, 2011
Experts: Housing price rise isn't a trend, especially in metropolitan areas
Originally published on Tue June 28, 2011 11:54 am
Realtors are hoping an uptick in home prices reported on Tuesday is the beginning of a turnaround, but industry experts say it's too soon to tell if the improvement is anything other than a seasonal blip.
The Standard & Poor's/Case-Shiller home price index reported that prices in April rose in 13 of the 20 cities tracked. Washington, D.C., saw the biggest price increases, followed by San Francisco, Atlanta and Seattle.
The index, which covers metro areas that include about 50 percent of U.S. households, rose 0.7 percent, the first increase since July 2010.
David M. Blitzer, chairman of the index committee at S&P Indices, said in a statement that the price rise is "a welcome shift from recent months," but he cautioned that seasonally adjusted numbers reflected an expected increase at the beginning of the spring-summer home-buying season.
"It is much too early to tell if this is a turning point or simply due to some warmer weather," Blitzer said in a statement.
Patrick Newport, an economist who tracks the housing sector at IHS Global Insight, said "the fact that housing prices seem to be settling down is very good news," but he cautioned that "there's always a seasonal kick that starts in April and goes away in October" and that the market has yet to bottom out.
"If you look at [prices] over a two-year period, they really haven't changed that much," Newport said, adding that he expects prices to drop another 5 percent between now and the first half of 2012.
The caveat comes along with numbers for several metro areas that showed a stark contrast to the best-performing markets. Six areas — Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa — were at their lowest levels in nearly four years.
Just last month, home prices in big metro areas sunk to their lowest since 2002. Since the housing bubble burst in 2006, prices have fallen more than they did during the Great Depression.
"We still have an elevated level of inventory," said Walter Molony, a spokesman with the National Association of Realtors.
Much of that excess inventory comes from foreclosures, which act as a major damper on the market, driving down prices, and can take months to work themselves through the system.
But Molony said the pace of foreclosure sales has picked up.
"They've been coming into the pipeline at a steady pace, and it looks like that activity is going to be peaking this year," he said.
In past recessions, housing purchases and the boost they provide to the construction industry have helped lead the nation to recovery. But most analysts expect only a gradual recovery for real estate, which weighs down any broader recovery.
Job growth and a halt to the decline in housing prices are key to a meaningful comeback for the housing market, Newport said.
The Associated Press contributed to this story.