From the Boston Herald – Associated Press
MIAMI — Home prices rose for the sixth straight month in November, fueled by tax credits for homebuyers.
The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday inched up 0.2 percent to a seasonally adjusted reading of 145.49. The index was off 5.3 percent from November last year, nearly matching analysts’ estimates that it would fall by 5.1 percent.
The index is now up more than 3 percent from its bottom in May, but still 30 percent below its peak in May 2006.
Rising Prices are Important to the Economy
Rising prices are important to the economic recovery because they make homeowners feel wealthier and lead them to spend more money. Consumer confidence rose for the third straight month in January, reaching its highest level in more than a year, the Conference Board said Tuesday.
Price increases also help restore home equity for the one-in-four homeowners who currently owe more on their mortgages than their homes are worth.
In a research note, Deutsche Bank analyst Joseph LaVorgna wrote that current price trends could lead to a $1 trillion year-over-year increase in homeowner equity by the first quarter of this year.
Karl Case, a co-creator of the index, pointed to signs of stability that were in stark contrast to rapidly falling prices a year ago. “Flat is good,” he said.
Phoenix and San Francisco posted the highest month-to-month gains, on a seasonally adjusted basis, while New York and Chicago had the largest declines.
Tax Credit for First-Time Home Buyers
The tax credit for first-time homebuyers had been scheduled to end Nov. 30, but Congress extended the deadline through April, and expanded the program to include a tax credit for current homeowners.
“A lot of people are thinking now is the time to buy because they are going to get a great bargain or a steal,” said Bill Wilkerson, a real estate agent with ZIP Realty in Phoenix. “I’m looking forward to a very active springtime.”
Prices increased for the seventh straight month in San Francisco, where sales in the $500,000 to $750,000 were strong. Buyers took advantage of the tax credits and low interest rates, said Chuck Colliver, president of Century 21 Alliance in Daly City, Calif.
“Those people who have been thinking about buying a house this year are probably going to put it on the front burner” because of the low rates, Colliver said.
In Las Vegas, prices edged up 0.1 percent, the first month-to-month increase since January 2007. Still, prices are down 56 percent in Las Vegas since peaking in April 2006.
Cities with Price Increases
The list of cities with price increases, on a seasonally adjusted basis, also included Los Angeles, San Diego, Denver, Boston and Charlotte, N.C.
While prices have risen steadily on a national basis, some economists predict they will dip again early this year because of high unemployment and foreclosures.
“Until we get job growth, we won’t get complete healing of the housing market,” said Jeff Humphreys, an economist with the University of Georgia.
Data for December and January could show price declines due to a lull in buyer activity after the tax credit was extended, Humphreys said.
UBS analyst David Goldberg estimates that prices could drop another 3 to 5 percent before unemployment levels out, possibly in the second half of this year.
“We’re probably in the latter stages of seeing home price declines,” Goldberg said.
Home prices fell for the third straight month in Tampa, Fla., where sales of distressed properties comprise about half of total sales, said Cathleen Smith, a regional vice president with Coldwell Banker.
Prices also dropped in Washington — which had posted seven straight monthly increases — Miami and Detroit.
The Case-Shiller indexes measure home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices increased 50 percent since the beginning of the index.