Home prices rise due to seasonal factors

By Peter Schroeder - 06/28/11 09:29 AM ET

The housing market was the subject of a rare bit of good news in April, as a leading home price index reported prices rose for the first time in eight months, ticking up 0.7 percent.

However, the beginning of the traditional homebuying season appears to be the primary reason for the boost. When the data are seasonally adjusted, the index actually shows a slight decline of 0.1 percent in home prices.

The experts behind the study were quick to point out that the beginning of the warmer months appears to be the reason for the increase, not any fundamental shift in the state of the housing market.

"In a welcome shift from recent months, this month is better than last — April's numbers beat March," said David M. Blitzer, chairman of the index committee at S&P Indices. "However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer homebuying season. It is much too early to tell if this is a turning point or simply due to some warmer weather."

While the Standard & Poor's/Case-Shiller Home Price Index found that home prices grew by nearly 1 percent from March to April when seasonal factors were discounted, home prices still fall below where they stood one year ago.

Nonetheless, any positive report should serve as a welcome respite from the recent run of disappointing economic reports for both financial markets and policymakers worried the economic recovery was taking a turn for the worse.

The 20 cities tracked by Case-Shiller experienced a gain of 0.7 percent in home prices. However, 19 of those cities were still down below April 2010 levels, with Washington being the lone metro area to actually gain in home prices over the last 12 months.

Overall, the 20-city composite tracked by the index is down 4 percent from April 2010, and six of those 20 cities — Charlotte, Chicago, Detroit, Las Vegas, Miami and Tampa — all experienced new lows in April.

Furthermore, five metro areas — Atlanta, Cleveland, Detroit, Las Vegas and Phoenix — were close to or had already lost all home price gains made in the last decade.

The index's newest findings come nearly one month after the Federal Reserve downgraded its economic expectations for the year, as Fed Chairman Ben Bernanke cited stronger and more persistent economic headwinds than the central bank originally assumed.