Housing prices rebound, but maybe just temporarily

Home prices in the second quarter rose 3.6 percent nationally after falling 4.1 percent in the first three months of 2011, according to the Standard & Poor's Case-Shiller Index released Tuesday.

Still, the national numbers showed prices 5.9 percent lower than in the second quarter of 2010, the final months of the federal home buyers' tax credit.

Economists had assumed there would be an uptick in prices in the cities in the index because the three months tracked - April, May, and June - are normally peak home-buying months.

They were not disappointed, but they did not appear to believe this to be a sustainable upward trend in prices.

"A seasonal kick accounts for the recent strength in the indexes," which saw a 1.1 percent increase in June over May, said economist Patrick Newport of IHS Global Insight in Lexington, Mass.

"This kick will wear off in the fall, when demand weakens and sellers have to give way on price, and prices will start dropping again," Newport said.

Although prices in 19 of the 20 metropolitan statistical areas covered in the survey - Philadelphia is not one of them - were up in June compared with May, their composite index was down 4.5 percent from June 2010.

That composite index has leveled off, Newport said.

"The big question is whether prices have hit bottom," he said, referring to the industry collapse that began nearly four years ago. "Our view is that foreclosures, excess supply, and weak demand will drive prices down another five to 10 percent."

If the U.S. economy slips into another recession, which Newport believes has a 4-in-10 chance of happening, "the unemployment rate will climb, driving foreclosures up, leading to an even larger drop in home prices."

David M. Blitzer, S&P's index committee chairman, described the June report as showing "mixed signals for recovery in home prices."

Looking at the performances of the individual cities in the Case-Shiller indexes, Blitzer said the results "suggest that we are back to regional housing markets, rather than a national housing market, where everything rose and fell together."

A separate analysis of metro Philadelphia's second-quarter home prices by economist Kevin Gillen of Econsult Inc. showed an increase of 0.7 percent from the first three months of the year.

Gillen described the modest increase as the first since 2008 that wasn't induced by government action - the federal tax credit that expired at the end of April 2010.

The region's prices had fallen a total of 11 percent in the three quarters after the credit's end, he said.

The region's house values have fallen by a cumulative average total of 19 percent since the end of the housing boom in the third quarter of 2007, Gillen said.