Housing prices increase for second straight month

Housing prices increased in May for the second straight month but still lag behind last year's level, a government agency reported on Thursday. 

Prices rose by a seasonally adjusted 0.4 percent, which was better than expected, although April's data was revised downward from 0.2 percent from a previously announced 0.8 percent gain, the Federal Housing Finance Agency (FHFA) announced on Thursday. 

Compared with a year earlier, prices were still down 6.3 percent and have dropped 19.6 percent from an April 2007 high. 

Regardless of the price increases, the housing market remains sluggish and is hampering the nation's economic recovery. Housing-sector experts have estimated that it could take several years for the market to fully recover as foreclosures and distressed housing continues to flood the market, holding back demand for new construction. Tighter lending standards and more current homeowners who are underwater on their mortgages also are weighing on a recovery. 

The FHFA's index is calculated by using the prices of houses purchased with mortgages backed by government-controlled mortgage companies Fannie Mae and Freddie Mac.

Sales of previously owned homes dropped by 0.8 percent in June behind a spike in contract cancellations, signaling what could possibly be the worst year for the housing sector since the market crashed, the National Association of Realtors said Wednesday. 

NAR's report also showed that the national median existing-home price for all housing types was $184,300 in June, up 0.8 percent from June 2010. 

Out of the nine Census regions, the Mountain area had the best monthly price gain, up a seasonally adjusted 2 percent compared with April. Prices in the East South Central, West North Central and South Atlantic states were up 1.3 percent, 1 percent and 0.9 percent, respectively, according to the FHFA report. 

Only the West South Central and Middle Atlantic states showed a drop, down 1 percent and 0.8 percent, respectively.

On an annual basis, prices in all regions declined, with New England down 2.6 percent while West South Central and Middle Atlantic states dropped 3.4 percent and 3.9 percent, respectively.