Are Home Prices Really RECOVERING?

U.S. home prices ended the second quarter with positive annual growth across the three major indexes for the first time in two years. It is being viewed as another signal for the housing bottom to take hold, but doubts still remain.

In the second quarter, home prices in the national index increased 1.2 percent from the same period a year earlier. Meanwhile, the 10-city and 20-city indexes edged 0.1 percent and 0.5 percent higher, respectively, according to the latest S&P Case-Shiller reading. Compared to the previous quarter, the national index jumped by 6.9 percent. The 10-city and 20-city indexes also made gains of about 6 percent from the first quarter. Charlotte and Dallas were the only two cities that witnessed annual rates of change that declined in June.

“We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change,” said David Blitzer, chairman of S&P’s index committee, according to WSJ. “The market may have finally turned around.”

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After the S&P Case-Shiller report, shares in home builders such as KB Home (NYSE:KBH) and Lennar (NYSE:LEN) received a boost of about 2 percent. Home improvement outlets Home Depot (NYSE:HD) and Lowe’s Companies (NYSE:LOW) also traded higher. However, gains were quickly pared and some home builders traded into negative territory. DR Horton (NYSE:DHI) and PulteGroup (NYSE:PHM) both declined by 1 percent.

While the summer uptick in home prices is uplifting for sellers and realtors, the housing market still remains on shaky ground. According to a new report from real estate site Zillow.com (NASDAQ:Z), half of borrowers under the age of 40 still owe more than their homes are worth. Younger borrowers are more likely to be underwater because they typically have been in their home for a shorter period of time.

Stan Humphries, Zillow chief economist, explained, “We hear about tight inventory in many markets, and it’s clear where this is coming from. Negative equity is trapping young people in their homes, preventing them from selling. These homes are like the very starter homes potential first-time homebuyers are seeking,” according to CNNMoney.

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