Spring buying gives housing market temporary lift
WASHINGTON — Home prices rose for the second straight month in most major U.S. cities and are stabilizing after years of declines. But analysts say the trend in prices hardly signals a rebound for the troubled housing market.
A flurry of spring buyers is helping boost sales. At the same time, millions of foreclosures are in limbo, awaiting the results of a government investigation into improper practices by mortgage lenders. Once that probe is complete, banks will resume seizing homes and prices will likely fall again.
The Standard & Poor's/Case-Shiller home-price index released Tuesday showed that prices rose in May in 16 of the 20 cities tracked.
Boston, Minneapolis and Washington posted the biggest monthly increases. Prices in Detroit, Las Vegas and Tampa, Fla. — three cities hit hardest by the housing crisis — fell to their lowest points since the recession began.
Price declines have been getting smaller through the year. Seasonally adjusted prices have fallen a modest 1.2 percent over the past six months, according to the index. That's roughly a third of the decline from the previous six months.
But analysts say the weakening job market and the uncertainty over foreclosures could lead to deeper price declines in the second half of the year. They estimate prices will fall another 5 to 10 percent by year's end.
"The aggregate economy is at a turning point and there is much uncertainty now," said Robert Shiller, a Yale professor and co-founder of the home-price index.
David M. Blitzer, chairman of S&P's index committee, said the month-over-month increases in May were attributed to a "seasonal period of stronger demand for houses." Such increases are expected, he said.
After adjusting for seasonal factors, such as spring buying, prices fell in 11 markets.
"Sustained increases in home prices over several months and better annual results need to be seen before we can confirm a real estate market recovery," he said.
Over the last 12 months, prices have fallen in 19 of the 20 cities tracked.
Housing remains the weakest part of the economy. High unemployment, larger down payment requirements and tighter credit are preventing many buyers from entering the market. Many who can afford to buy are waiting because they are worried prices have yet to hit bottom.
Foreclosures and short sales — when a lender agrees to sell for less than what is owed on a mortgage — made up about 30 percent of all home sales last month, up from about 10 percent in past years. And 1.7 million potential foreclosures are being held up, according to real estate firm CoreLogic, either by backlogged courts or lenders awaiting state and federal probes into troubled foreclosure practices.
At least 10 percent of homeowners are 90 days or more past due on their mortgage payments in nine major U.S. cities, according to CoreLogic. The national average is 7.4 percent.
Most of those areas are well known trouble spots, including Atlanta, Las Vegas, Phoenix, Tampa, Fla., and Riverside, Calif. But others haven't been as battered, including Chicago, Orlando, Fla., Long Island, N.Y., and Sacramento, Calif. That suggests the weakness in the housing industry is nationwide, economists say.
"We're just really bouncing along the bottom right now," said Chris Christopher, senior economist at IHS Global Insight. "Even with the positive news, there's nothing very meaningful in these reports to show we're coming back up. It's just little blips here and there."
There's also less demand because the U.S. is seeing a decline in household formation. Fewer people are getting married. More young people are moving back in with their parents. Fewer immigrants are coming to the United States, partly because of the economy and also because of tougher enforcement of immigration laws. And the divorce rate has dropped, which is good for families but means there are fewer buyers.
Before the recession, between 2002 and 2007, roughly 1.3 million households were formed every year, according to U.S. Census data. That figure peaked in 2007 at more than 1.6 million. But since then it has fallen to just 357,000 last year, the lowest level in more than 60 years.
One bright spot in the S&P/Case-Shiller data: Even when adjusted for seasonal factors, month-over-month prices rose in some markets that had been pummeled by slumping sales. Those cities are Chicago, Denver, Miami, Minneapolis and Seattle.
The index measures prices compared with those in January 2000. It then provides a three-month average. The May data is the latest available.
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