After seven consecutive months of declines, home prices moved up in April, according to the S&P/Case-Shiller Home Price Indices, released today. Both the 10- and 20-city composite indices were up 1.3% for the month. While both composites were down on an annual basis, dropping 2.2% and 1.9% respectively, those losses are reduced from March’s annual declines of 2.9% and 2.6%.
S&P Indices emphasizes their data’s non-seasonally adjusted numbers, considering them to be more reliable. However, April is generally heavily influenced by cyclical trends as markets move into the spring selling season. When seasonal factors are taken into account, both composites improved 0.7% for the month.
"Three forces can explain this unexpected development," wrote Patrick Newport, U.S. economist at IHS Global Insight, in a statement discussing the numbers today. "One is today’s low mortgage rates. A second is strong demand coming from investors. The third is the drop in the number of homeowners listing their homes for sale," due to eroded equity.
Of the 20 metro statistical areas (MSAs) tracked, 19 recorded monthly gains, on a non-seasonally adjusted basis. Detroit was the outlier with a 3.6% decline from March. Seasonally adjusted prices were improved in 17 MSAs, but Boston, New York, and Detroit moved downward.
On an annual basis, Phoenix and Atlanta stood on opposite ends of the price spectrum. Atlanta registered the largest year-over-year decline—the only double-digit drop in the group—with a 17.0% loss. Phoenix posted the strongest annual gain, up 8.6%. Eighteen MSAs and both composites saw their year-over-year numbers improve compared to March’s report.
And while a single month of improvement does not a trend make, "going forward, I’m feeling pretty good about having hit a bottom," said Gary Painter, an economist at the USC Lusk Center for Real Estate, on a call with Builder. "It doesn’t mean house prices are going to recover quickly. The job market is weak. But people are moving out of parents’ homes."
That trend won’t translate into a big push for home sales right away, Painter noted, as new household formations will likely sprout more activity in the rental market in the near term, but it should contribute to flatness followed by small increases in home pricing. "Eventually, we’ll start to see rents go up, and when rents start to accelerate, that will be the real signal of good news in the price market, because then buying will look financial attractive again," Painter said.
Claire Easley is a senior editor at Builder.