Home prices in major metro areas across the country saw a lift in July for a fourth consecutive month of improvement, according to data released today in the S&P/Case-Shiller Home Price Indices. Seventeen of the 20 cities tracked showed price gains compared to June (Las Vegas and Phoenix were down, Denver was unchanged), and both composites were up 0.9% on a monthly basis. More importantly, while 18 of the 20 cities and both composites were down on an annual basis (the 10-city declined 3.7%, and the 20-city was down 4.1%), 14 cities and both composites saw improved rates of change in July.
While monthly increases were anticipated, thanks to seasonal factors, there was a surprise in the report: Detroit joined Washington, D.C., on the list of metro areas that reported an annual price increase. Not only that, but the city that has become the poster child for the ravages of the recession posted a larger gain than the nation’s capital, improving 1.2% on an annual basis, compared to D.C.’s 0.3% gain.
David Blitzer, chairman of S&P’s Index Committee, credited the change to data revisions. "Our sales pairs data indicate that [Detroit] reported a lot more sales in May and June, which caused the revisions. … When sales volumes are relatively low and the ratios of distressed-to-non-distressed sales are changing rapidly, revisions are more noticeable."
However, despite the improving number, Blitzer remained cautionary about the future. "If you look at the state of the overall economy and, in particular, the recent large decline in consumer confidence, … statistics continue to indicate that the housing market is still bottoming and has not turned around."
Patrick Newport, U.S. economist at IHS Global Insight, added further caution noting that the S&P indices are not seasonally adjusted. Once seasonal factors are accounted for, he said, the 20-city composite’s July reading goes flat, the 10-city reports a decline of 0.1%, and the number of cities reporting monthly improvements slips from 17 to only eight.
However, overall, Newport’s tone was optimistic. "The seasonally adjusted indexes are stabilizing," he wrote in a release today regarding the numbers. "Both composite indexes (seasonally adjusted) are at the same level as they were in March. … The (Federal Housing Finance Agency) seasonally adjusted purchase-only house price index, confirms that home prices are no longer falling. This index, which tracks the prices of homes from Fannie Mae- and Freddie Mack-acquired mortgages, increased for the fourth straight month in July."
Newport says the stabilization may have to do with the slowdown in distressed sales due to robo-signing issues, and the drop in mortgage rates. "A third reason is that in some cities, prices are so undervalued that they are not likely to fall further," he wrote. "Detroit, which largely avoided a run-up in prices, but still saw prices collapse, may be a case in point."
Stabilization notwithstanding, the question of whether or not prices have hit bottom once and for all remains, Newport says. "Our view is that foreclosures, excess supply, and weak demand will drive prices down another 5% to 10%."
Claire Easley is a senior editor at Builder.