Housing Prices Rise For Second Straight Month In May
LOS ANGELES (CBS/AP) — Home prices in major U.S. cities rose for the second straight month in May, propped up by an annual flurry of spring buyers. But after adjusting for such seasonal factors, prices fell in a majority of markets.
The Standard & Poor's/Case-Shiller home-price index released Tuesday showed that prices rose in 16 of the 20 cities tracked.
Beth Ann Bovino, chief economist for Standard and Poor's, said the latest figures show growth, but there is still a seasonality problem. If you look at the seasonally-adjusted data, Bovino said the levels are still down 4 percent.
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Boston posted the biggest monthly increase, followed closely by Minneapolis and Washington. Three metro areas hit the hardest by the housing crisis - Detroit, Las Vegas and Tampa, Fla. - hit their lowest points since the recession began. Prices in Phoenix were unchanged.
Still, 19 of the 20 cities have seen year-over-year price declines.
The 20-city index rose 1 percent in May from April. The index measures prices compared with those in January 2000. It then provides a three-month average. The May data is the latest available.
Last year, a tax credit for first-time buyers helped boost prices. They rose nearly 4 percent from April through July before falling more than 7 percent this winter to record lows. Prices in big metro areas sank in March to their lowest levels since 2002.
Housing remains the weakest part of the economy. Sales of previously owned homes fell in June for a third straight month to a seasonally adjusted annual rate of 4.77 million homes. This year's pace is lagging behind the 4.91 million homes sold last year - the fewest since 1997. In a healthy economy, people buy roughly 6 million homes per year.
Home sales have fallen in four of the past five years, forcing prices down in most areas. Declining home values have made people feel less wealthy, and they are spending less as a result. That affects consumer spending, which accounts for 70 percent of economic activity.
Fewer first-time homebuyers are able to qualify for a loan or have the money required for a down payment. A growing number of contracts are being canceled before sales are final, because unexpectedly low home appraisals are scuttling loans. Few people want to take on the extra debt associated with a home purchase.
High unemployment, millions of foreclosures and tighter credit are likely to keep people from buying homes in the second half of the year, economists say. Even historically low home prices and cheap mortgage rates haven't brought people back to the market.
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 a wave of foreclosures are being held up, either by backlogged courts or lenders awaiting state and federal probes into troubled foreclosure practices.
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