Housing bust might have run its course

By Peter Schroeder - 08/30/11 09:16 AM ET

Homes across America increased in value in the spring of 2011, providing a strong indication that the slide in the market might finally be over.

Home prices increased by 3.6 percent in the second quarter of this year, and were up in 19 of the 20 metropolitan areas tracked by the Standard & Poor’s/Case-Shiller home price index. That index, however, showed that home prices were still 5.9 percent lower than they stood one year ago.

In what potentially could be an indication that the housing bust has run its course, none of the 20 cities tracked by the index hit new lows through June, and 12 of the cities have now shown increases for three straight months.

But the 20-city index showed home prices were still down slightly when adjusted for seasonal factors, dropping 0.1 percent from the first quarter to the second.

The experts who compiled the data said they paint a complicated picture of the housing market, which is crucial to the economic recovery.

“This month’s report showed mixed signals for recovery in home prices,” said David M. Blitzer, chairman of the S&P Index Committee.

He noted that eight cities hit bottom a year ago and have stayed above those lows since then, indicating “relatively strong markets” for housing.

But at the same time, five cities — Detroit, Las Vegas, Miami, Phoenix and Tampa, Fla. — have hit new lows in 2011, suggesting they still have a ways to go.

“These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together,” Blitzer said.

If the housing market is becoming fragmented, that could complicate matters for the Obama administration, which is searching for a way to boost the economic recovery through aid to homeowners.

The biggest gainers from May to June were Chicago and Minneapolis, which each saw home prices climb 3.2 percent. Eleven of the 20 cities tracked posted price boosts from May to June of at least 1 percent, and Portland, Ore., was the only city to not show an increase in prices. It remained flat from May to June.

But even with the new gains, all the cities tracked remain well below the levels they experienced one year ago. For example, Minneapolis had one of the highest increases in home prices in the new report, but home prices there are still 10.8 percent lower than they were a year ago.

All told, the 20 cities tracked were down 4.5 percent from a year ago.