The housing market is holding a steady path to recovery, according to the latest release on Tuesday by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices. Seasonally adjusted, the 10-city composite index rose by 1.1 percent in May compared to April, while the 20-city composite index increased by 1.0 percent.
While still improving in May, the pace slowed from the 20-city index gaining 1.7 percent in April and came up shy of a 1.4 percent rise economists expected.
Through May, prices have now climbed back to spring 2004 levels. However, average home prices are still sitting about 25 percent below 2006 peaks.
Compared to last May, prices for the more closely watched 20-city index rose 12.2 percent, roughly in line with expectations. It was the biggest year-over-year gain since March 2006. Helping the rise, Dallas and Denver hit all-time highs, exceeded records set pre-recession and becoming the first cities to achieve new record levels.
From a month-over-month perspective, San Francisco recorded the largest gain, at 4.3 percent. That was followed by Chicago (+3.7%) and Atlanta (+3.4%). With a 3.1 percent advance in May from April, Seattle posted its biggest one-month gain since April 1990. No cities posted a decline on a non-seasonably adjusted basis. Seasonally adjusted, Cleveland and Minneapolis were modestly down from April to May.
Year-over-year, San Francisco has seen the largest housing price appreciation at 24.5 percent, followed by Las Vegas at 23.3 percent and Phoenix at 20.6 percent. The smallest gain has been seen in New York, at 3.3 percent, closely trailed by Cleveland at 3.4 percent.
"The overall report points to some shifts among various markets: Washington DC is no longer the standout leader and the eastern Sunbelt cities, Miami and Tampa, are lagging behind their western counterparts," according to the report.
The housing market has been a bright spot for the U.S. economy for more than one year, adding positively to gross domestic product in 2012 for the first time in seven years. Not doubting the housing sector recovery, the recent gains are starting to face some justifiable scrutiny. May marked the third straight month of double-digit year-over-year increases, a fact that has some economists concerned as an unsustainable (and maybe unrealistic) rate of growth. The numbers could be skewed because sales of foreclosed homes are slowing and not coming at steep discounts as compared to past years since the financial crisis.
In the first half of 2013, the number of U.S. properties with foreclosure filings (default notices, scheduled auctions and bank repossessions) was down 23 percent compared to the same period in 2012, according to RealtyTrac. In June, the number of foreclosure filings was down by 35 percent compared to a year earlier, representing the lowest level since December 2006. As time moves on, the slowing foreclosure pace should start to be normalized in the year-over-year figures, meaning that it’s likely that the rapid acceleration in housing prices will start to slow.
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