US Housing Prices Rise In May By Most In 7 Years: CoreLogic

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A newly built single-family home that is sold is seen in San Marcos, Calif., Jan. 30, 2013. Privately owned homebuilders are seizing on a housing supply crunch to tap the stock market as more Americans, buoyed by an improving economy, seek to buy their first home or move into bigger premises.

U.S. home prices rose 2.6 percent in May from April, and they were up 12.2 percent compared to the year-ago period, the biggest year-over-year increase since February 2006 and the 15th consecutive monthly increase in home prices nationally, data firm CoreLogic (NYSE: CLGX) said Tuesday. The increase suggests the housing recovery is strengthening.

Excluding distressed sales -- typically foreclosures or short sales -- home prices were up 11.6 percent on a yearly basis.

"Across the country, pent up demand and continued low interest rates are fueling strong demand for a limited inventory of properties," Anand Nallathambi, president and CEO of CoreLogic said in a statement. "We expect that trend to continue to drive up prices throughout the balance of the summer months."

The report forecast prices will rise by another 2.9 percent in June for a yearly gain of 13.2 percent.

Capital Economics’ Paul Diggle said in a note that the national housing market is still in rebound, not bubble, mode. But he doubts that house prices can continue to race ahead at double-digit rates in the medium term.

According to Diggle, the tide has turned for housing supply -- there were 200,000 more homes for sale in May relative to January, and the months’ supply of unsold stock has ticked up from a low of 4.7. Looser supply conditions will take some of the heat out of price rises. At the margins, higher mortgage interest rates will also help to moderate price gains -- 30-year rates averaged 3.7 percent in May, but are up at 4.5 percent now.

“A slower pace of price rises would be no bad thing,” Diggle said. “If double-digit price gains became a permanent feature of the recovery, bubble fears would start to look a whole lot more justified.”

There’s no reason why housing starts and new home sales -- the channel through which housing makes most of its contribution to gross domestic product -- can’t continue posting rapid increases alongside a more modest pace of price gains.

Shares of several homebuilders including Lennar Corp. (NYSE: LEN) and Ryland Group (NYSE: RYL) rose in pre-market trading.

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