Prices rose in August for 10 of the index's 20 metro areas compared… (Joshua Lott, Bloomberg )
Providing a ray of hope for the beleaguered housing market, a closely watched index of home prices in major U.S. cities nudged upward in August, marking the end of what is typically the busiest sales season of the year.
Home prices have risen for five months in a row, but whether the spring and summer gains will prove lasting is an open question. Sustained improvement in housing may be hard to achieve in the months to come, experts said, if the nation's foreclosure machinery picks up momentum and employers remain reluctant to hire.
"We will probably see a reemergence of the seasonal dip in most markets, quite frankly, including California," said Thomas A. Lawler, founder of research firm Lawler Economic & Housing Consulting.
The Standard & Poor's/Case-Shiller index of 20 metropolitan areas rose a meager 0.2% from July to August, an uptick many analysts noted as probably seasonal in nature and influenced by the decline in foreclosed properties as a share of the total number of homes sold.
Comparing the August reading with the same month a year earlier, the index fell 3.8%, a drop economists viewed positively because it was one of the slowest rates of year-over-year decline registered by the index all year.
Christopher Thornberg, principal of Beacon Economics, said other home price indicators point to two trends developing in the nation's housing market: Values are declining for homes in distress — those properties that are either foreclosures or cases where the homeowners are delinquent on their mortgages — but other homes are fetching higher prices.
These two divergent forces are flattening out overall market values, he said. The main source of sales sluggishness is the scarcity of potential move-up buyers with equity in their homes.
"The biggest problem is not credit, it is not confidence, it is equity," Thornberg said. "No equity, no move-up buyer; no move-up buyer, you get a slow market."
But David M. Blitzer, chairman of the index committee at S&P Indices, said he sees "a modest glimmer of hope" in improvements in some aspects of the data.
Prices rose in August for 10 of the index's 20 metro areas compared with July, and prices fell in the other 10 cities.
California cities stumbled. Home prices in Los Angeles fell 0.4% over the previous month, San Diego prices declined 0.2% and San Francisco saw a 0.1% drop.
Atlanta experienced the biggest decline, down 2.4%. Las Vegas fell 0.3% and Phoenix was down 0.1%.
The Midwest has made gains in home prices in recent months, and Chicago and Detroit were both up 1.4% over July. Washington has fared better than other regions and gained 1.6%.
Earlier this year, the 20-city index dropped below its previous bottom, hit in April 2009, confirming a double dip in prices, but has come up above that level since. Some economists predict a renewed decline in prices in fall and winter, typically slower periods for the market.
Economists have had trouble pinpointing the source of the recent rise in prices.
Home values often rise in the spring and summer months because families more actively shop for houses so they can complete moves before the start of the new school year. But the number of foreclosed homes for sale also has been dwindling because foreclosure processing by the big banks has slowed down as a result of investigations into their practices.
"Prices just stabilized earlier in the year because of foreclosure-gate last year, where the lenders stopped foreclosing on so many homes to get their books back in order," said Patrick Newport, an economist with IHS Global Insight. "Now they are ramping up."
But Lawler disagreed, saying that the recent increase in the number of notices of default, the first formal stage of the foreclosure process, was mostly due to activity by Bank of America. There has yet to be a significant uptick in home repossessions by banks.
"We have seen that a few banks have started to accelerate the foreclosure process somewhat, but we haven't really seen it translate into actual repossession of homes," he said. "I don't think we have seen immense signs that banks have re-accelerated the process."