WASHINGTON – U.S. home prices rose in June from the same month last year, the first year-over-year increase since the summer of 2010. The increase is the latest evidence of a nascent recovery in the housing market.
The Standard & Poor’s/Case-Shiller home price index released Tuesday showed a gain of 0.5 per cent from June 2011.
The last time the year-over-year index increased was in September 2010. For much of that 12-month period, the government was offering a home-buying tax credit.
The report also showed that all 20 cities tracked by the index rose in June from May, the second consecutive time in which every city posted month-over-month gains. And all but two cities posted stronger gains in June than May.
Detroit, Minneapolis, Chicago and Atlanta recorded the biggest one-month gains.
“The combined positive news coming from both monthly and annual rates of change in home prices bode well for the housing market,” said David Blitzer, chairman of the S&P’s index committee.
Jonathan Basile, an economist with Credit Suisse, said improving home prices should boost home sales further in the coming months.
“Persistent news of rising house prices should start convincing prospective home sellers that it’s not just a buyers’ market,” Basile said. “And when Americans become more comfortable with selling their home, they also become more comfortable with buying another one.”
The S&P/Case-Shiller monthly index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The June figures are the latest available.
The increases partly reflect the impact of seasonal buying. The month-to-month prices aren’t adjusted for seasonal factors.
Still, a measure of national prices rose for the third straight month. Home prices jumped nearly 7 per cent in the April-June quarter compared to the previous quarter.
The housing market is making a modest but steady recovery in part because homes are more affordable: Mortgage rates have fallen to near-record lows. Housing prices are about one-third lower than at the peak of the housing bubble in 2006. Those trends have helped lift sales of both new and previously occupied homes.
Sales of previously occupied homes increased in July from June, the National Association of Realtors said last week. Sales have jumped 10 per cent in the past year.
Builders are growing more confident after seeing more traffic from potential buyers. Last month they applied for the largest number of building permits in nearly four years last month.
The housing market has a long way to go to reach a full recovery. Some economists forecast that sales of previously occupied homes will rise 8 per cent this year to about 4.6 million. That’s still well below the 5.5 million annual sales pace that is considered healthy.
Sales have been held back by a low supply of homes on the market and tight credit standards, economists said. Many would-be buyers are having trouble qualifying for loans or can’t afford larger down payments being required by banks. A Federal Reserve report last month showed that many banks tightened their mortgage credit standards this summer.
Still, the housing market is steadily improving and is poised to contribute to economic growth this year. Modest economic growth and job gains are encouraging more Americans to buy homes.