US Home Prices Rise For First Time In 3 Years

Source : The Straits Times, July 30, 2009

NEW YORK: Home prices in major cities in the United States registered the first monthly gain in nearly three years, the latest sign that the housing market may have finally turned the corner.

The widely watched Case-Shiller home price index for May posted an increase of 0.5per cent, the first monthly rise since 2006, instead of a forecast 0.5per cent decline, though prices have tumbled more than 32per cent from their peak in the second quarter of 2006.

'This is much more important than an up day on the stock market. It may mean we have changed direction,' Yale University economist Robert Shiller, one of the developers of the index, told Reuters Television.

After seasonal adjustment, prices showed a 0.2per cent decline, but this was still an improvement in the recent trend, economists said.

It is 'a pretty significant indicator that we might be at or near a bottom', the other developer of the index, economist Karl Case, said in an interview.

After a plunge lasting three years, houses have finally become cheap enough to lure buyers. That, in turn, is stabilising prices, generating hope of a property market recovery.

Other recent signs of a turnaround were seen in new home sales data for last month which jumped 11per cent, the biggest monthly gain in eight years, the US Commerce Department said on Monday.

Existing home sales rose for the third straight month last month, the National Association of Realtors said last week, feeding optimism about the beleaguered housing sector.

Still, caution is warranted as long as the US unemployment rate and mortgage foreclosures keep rising, said professors Case and Shiller.

The index tracks home prices in 20 metropolitan areas. The nationwide index of house prices was still down 17per cent in May from the same month last year. But the rapid deterioration in prices has slowed since January.

However, home prices are still falling in many areas, with high unemployment and looming foreclosures likely to weigh down real estate for the foreseeable future. -REUTERS, LOS ANGELES TIMES