The depressed housing market flashed a positive signal in July, with home prices in most major U.S. cities rising for the fourth straight month
The Standard & Poor's/Case-Shiller index released Tuesday showed that prices rose from June to July in 17 of the 20 cities the index tracks. Detroit, Chicago and Minneapolis posted the biggest percentage gains. Prices fell in two cities among those hit hardest by the housing crisis _ Las Vegas and Phoenix.
The index, which covers half of all U.S. homes, measures prices compared with those in January 2000 and creates a three-month moving average. The July data are the latest available.
Analysts cautioned that the price increases are likely temporary, buoyed by seasonal buying, and not evidence of a housing recovery. Home sales have declined in each of the months in which prices rose.
Prices are expected to drop again this fall and winter, based on the poor sales and on expectations that banks will resume processing a raft of foreclosures that have been in limbo.
"This is still a seasonal period of stronger demand for houses, so monthly price increases are expected," said David M. Blitzer, chairman of S&P's index committee. "While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery."
Over the past 12 months, prices have fallen in all but two cities: Detroit and Washington, D.C.
In Detroit, prices have risen 1.2 percent. Its housing market has been among the nation's worst over the past decade. In July, prices there equaled 1995 levels.
"In some cities, prices are so undervalued they are not likely to fall further," said Patrick Newport, U.S. economist at IHS Global Insight. "Detroit, which largely avoided a run-up in prices but still saw prices collapse, may be a case in point."
Washington, conversely, has had the nation's best housing market. Prices in the nation's capital have increased 0.3 percent in those 12 months and were equal to 2004 levels in July.
Housing is a key reason why the economy continues to struggle more than two years after the recession officially ended.
High unemployment, larger required down payments and tighter credit are preventing many buyers from entering the market. Many who could afford to buy are waiting because they're worried that the economy could fall back into another recession and home prices could fall further.
Previously occupied homes are selling only slightly faster than last year, when sales were the lowest since 1997.
New-home sales dropped in August for a fourth straight month. This year is shaping up to be the worst for sales of new homes since record-keeping began in 1963.
And prices are certain to fall further once banks resume millions of foreclosures that have been delayed because of a 10-month government investigation into mortgage lending practices.
"This effect (of spring buying) will fade soon because sales have dropped back in recent months," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. "We expect to see price declines again by the autumn, but we do not anticipate a renewed collapse" in the housing market.