U.S. home prices rose for the fifth straight month and posted the second quarterly increase, but the pace of appreciation in September slowed and was less than expected, according to Standard & Poor's/Case-Shiller indexes on Tuesday.
We have seen broad improvement in home prices for most of the past six months, David M. Blitzer, chairman of the Index Committee at S&P, said in a statement. However, the gains in the most recent month are more modest than during the seasonally strong summer months.
The S&P composite index of home prices in 20 metropolitan areas rose 0.3 percent in September from August after a 1.2 percent rise the prior month, below the 0.8 percent rise forecast in a Reuters poll.
The 20-city index had an annual decline of 9.4 percent.
The national index for the third quarter increased 3.1 percent from the prior quarter, the same as in the second quarter, resulting in an 8.9 percent annual drop. That was a significant improvement from the 14.7 percent annual downturn reported in the prior quarter and 19 percent slump in the first quarter.
The 10-city composite index rose 0.4 percent in September after a 1.3 percent August gain. The annual drop was 8.5 percent.
We are going into the holiday season, and consumers are not losing value on their homes, said Craig Thomas, senior economist at PNC Financial Services in Pittsburgh. Last Christmas, they were losing equity value on their homes at a 20 percent clip.
Both the 10-city and 20-city indexes emerged from double-digit annual declines for the first time in 21 months, S&P said.
The November extension of the $8,000 first-time homebuyer tax credit, and the addition of a $6,500 credit for move-up buyers, should support home sales and prices in coming months, economists said.
So should mortgage rates that hover near record lows. Average 30-year home loan rates are close to 4-7/8 percent, according to Freddie Mac
This is another indication that the housing market is not taking away from the aggregate economy, and housing is what led us into this (recession) in the first place, Thomas said after the latest home price gains.
Average home prices have returned to levels last seen in autumn 2003 as they gain traction after a three-year rout.
Fewer cities had monthly price improvements in September than in August.
San Francisco and Washington, DC, reported the six straight month of positive returns. Chicago, Minneapolis, San Diego each had their fifth straight month of price increases. Nine metro areas in total had positive monthly returns in September.
Las Vegas remained the most depressed market, S&P said. Prices there have fallen for 37 straight months, slumping 55.4 percent from the peak.
The home price trend overall does suggest that maybe we're seeing a turn in the housing market and that we're cleaning up some inventory, said Gary Thayer, chief macrostrategist at Wells Fargo Advisors in St. Louis.
This part of the economy is particularly weak, and we're seeing more consistent signs of recovery, he added. But high unemployment and foreclosures are still problems for the housing market. So we're not completely out of the woods.
(Additional reporting by Richard Leong and Ellen Freilich; Editing by Padraic Cassidy)