3-year Descent in Home Prices Appears at End

From New York Times

According to recent reports and forecasts by housing analysts, the three-year descent in home prices appears to be at an end. Eight cities, including San Francisco, showed price increases in May, up from four in April, and one in March, according to Standard and Poor’s/Case-Shiller Index. For the first time since early 2007, the index of 20 major cities was virtually flat, rather than down.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Earlier reports show that sales of existing homes nationwide rose last month for the third consecutive month, while sales of new homes increased in June by the largest percentage in eight years, according to the NATIONAL ASSOCIATION OF REALTORS® (NAR) and the U.S. Commerce Dept., respectively.

· Although some skeptics believe the market is pausing before home prices decline further, the median price in California’s housing market appears to be stabilizing. June marked the fourth consecutive month of rising home prices and the second largest gain on record for the month of June, based on statistics dating back to 1979. The year-to-year decline in June also was the smallest in the past 16 months.

· The S&P/Case-Shiller price index for 20 cities showed a half-percent gain when May was compared with April. It was the first month-over-month increase in the index in 34 months. “It is very possible that years from now we will say that April 2009 was the trough in home prices,” said Maureen Maitland, vice president for index services at Standard & Poor’s.

· One explanation for the increase in median prices is the rise in demand from buyers, especially first timers taking advantage of the $8,000 federal tax credit, which expires in December. The NATIONAL ASSOCIATION OF REALTORS® (NAR) is lobbying for the tax credit to be extended and to be replaced with a $15,000 credit for all buyers.

· Another factor in the market’s resurgence is the prevalence of foreclosures, which make up about a third of all existing home sales. “Although another surge of foreclosures is expected later this year, demand remains strong, so the market may be able to absorb more distressed properties without significantly impacting the median price,” said C.A.R.’s Chief Economist Leslie Appleton-Young.

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