U.S. home prices slightly up, economic forecast down
Home prices in major urban areas are slightly on the rise, showing an improvement in real estate sales in the United States. However, some analysts believe this only reflects the common patterns of sales rising in the spring after a slow winter, and not that real estate is actually improving.
For the second consecutive month, home prices in major U.S. cities rose slightly in May, according to the Standard & Poor’s/Case Shiller index. Yet economists claim the 1 percent increase is more indicative of the season than a sign of recovery.
Spring is typically a popular time for families to go house shopping, housing experts say, compared with winters when a larger proportion of sales are foreclosures purchased by investors.
Sixteen of the 20 metro areas tracked by the Case-Shiller index released Tuesday posted increases on a month-over-month basis, the L.A. Times reports. But only Washington D.C. was up from May 2010, rising 1.3 percent. From April to May, Los Angeles was up 0.5 percent, San Diego 0.2 percent and San Francisco 1.8 percent. Overall, home prices slid 4.5 percent when compared with last May.
“We have now seen two consecutive months of generally improving prices,” David Blitzer, chairman of the index, told the New York Times. “However, we might have a long way to go before we see real recovery.”
In separate housing data released by the Commerce Department on Tuesday, new home sales dropped to a three-month low of 1 percent, putting sales at an annualized pace of 312,000 and dashing hopes of a rebound that could help fuel broader economic growth.
After federal tax credits expired last year, the housing market fell into a renew slump with home prices falling to a new low in March – a low even lower than the recession-era bottom hit in April 2009. Since then, prices have slowly increased.
With more and more homes headed into foreclosure and fewer buyers on the hunt, house prices are likely to remain depressed for the rest of this year, experts say. It hasn’t helped that the unemployment rate increased to 9.2 percent in June and that consumer confidence remains weak.
A depressed housing market also hurts related businesses such as residential construction, home improvement and furniture companies – hampering key drivers of an overall U.S. economic recovery even further.
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