Home prices across the country ticked up slightly in August, S&P/Case-Shiller reported today. But prices were still down compared with August 2010, highlighting the tough road to recovery for home prices, which have declined by a third since their peak in 2006.
The widely-used measure of U.S. home prices showed housing prices increased 0.2 percent in August for the 10- and 20-city composite measurements, compared with July.
With 16 of 20 cities and both indexes seeing their annual rates of change improve in August, David Blitzer, chairman of the Index Committee at S&P Indices, said he sees “a modest glimmer of hope with these data.”
Last month, the 10 and 20-city composites increased 0.9 percent in July from June, but areas are still below levels from one year ago. Compared with August 2010, the 10-city Composite is now down 3.5 percent and the 20-city is down 3.8 percent.
Prices in 10 of the 20 cities increased over the month. Sixteen of the 20 metropolitan statistical areas (MSA) and both the 10 and 20-city composites had higher annual returns compared with data from July, or -3.5 percent and -3.8 percent, respectively, over August 2010.
Los Angeles and Miami saw no change in annual returns while those of Atlanta and Las Vegas declined.
“In the August data, the good news is continued improvement in the annual rates of change in home prices,” Blitzer said. “In spring and summer’s seasonally strong period for housing demand, we cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing.”
Detroit and Washington, D.C. were the only two cities to have positive annual returns of 2.7 percent and 0.3 percent. Minneapolis had the lowest return compared with last year at -8.5 percent, but has improved the last three months.
Meanwhile, mortgage rates are still near 60-year lows. Freddie Mac reported the 30-year fixed-rate mortgage average was 4.12 percent for the week ending Oct. 13, up from the previous week’s lowest recorded 30-year fixed-rate of 3.94 percent.
Guy LeBas, chief fixed income strategist with Janney Capital Markets, said the lower mortgage rates have only temporarily forestalled the drop in home prices, and the housing market’s supply-demand imbalance “remains quite severe.”
LeBas estimates the decline in borrowing costs between July and August resulted in a 12 percent improvement in housing affordability.
“Of course, the benefits of lower mortgage rates are a temporary phenomenon, and when the aforementioned supply-demand imbalance comes back into focus or when mortgage rates begin to rise, we’d expect renewed declines in residential real estate values,” he wrote in a morning note.