U.S. home prices inched higher again in July, extending gains to
what is now three straight month of increases across all major
markets, fueling a sense of optimism that perhaps this time around
a recovery in housing will finally stick.
The latest S&P/Case-Shiller Home Price Indices report showed
that on a month-to-month basis, the 10-City and the 20-City
Composites rose 1.5 percent and 1.6 percent, respectively, from
June levels, and all 20 cities surveyed saw positive monthly
The upward momentum added to a growing perception that the
housing market, which was at the epicenter of the 2008 credit
crisis, might be finding a bottom.
As recently as last spring, home values were still tanking to
new cycle lows nationall. But home prices have been rebounding
since then and now remain about 30 percent off their 2006 peak
levels. Many see a recovery in housing as key for any sustainable
recovery in the broad U.S. economy.
"The news on home prices in this report confirm recent good news
about housing," S&P Dow Jones' Chairman of Index Committee
David Blitzer said in the report. "Single family housing starts are
well ahead of last year's pace, existing home sales are up, the
inventory of homes for sale is down and foreclosure activity is
slowing. All in all, we are optimistic about housing."
Indeed, it seems demand for housing is picking up pace. Lennar
Corp., one of the country's largest homebuilders, reported Monday
that its third-quarter net earnings nearly quadrupled compared with
the samee year-earlier quarter.
"The housing market has stabilized and the recovery is well
under way," Lennar's Chief Executive Officer Stuart Miller said in
a press release Monday. "Low mortgage rates and affordable home
prices increased buyer confidence and an extremely favorable
rent-to-own comparison are driving growth in each of our
This upward momentum is likely to continue supporting
homebuilder ETFs such as the $1.40 billion iShares Dow Jones U.S.
Home Construction Index Fund (NYSEArca:ITB) and the $2.01 billion
SPDR S&P Homebuilders ETF (NYSEArca:XHB), which have already
had nothing-short-of stellar performances so far this year.
ITB is the single-best-performing ETF year-to-date, with gains
of more than 70 percent, while XHB ranks as the
third-best-performing fund of 2012, with nearly 52 percent in
gains. Both funds, which hold firms like Lennar and other
homebuilder names such as Pulte among their top holdings, started
off the day up more than 0.5 percent on the data, but turned lower
as the market traded in the red Tuesday.
A Lot Of Ground To Cover
From an annual perspective, 16 out of the 20 surveyed cities saw
in July improvement in home prices year-over-year. As of July, only
four cities-Atlanta, Chicago, Las Vegas and New York-were in the
red when compared with year-earlier values.
Indeed, Atlanta remains one of the weakest markets in this
crisis, with home values there still 9.9 percent lower now than
they were a year ago. What's more, a home in Atlanta, as well as in
Detroit and Las Vegas, still costs less today than it did in
That goes to say that the recovery seems to be happening, but
some markets have a lot of ground to cover.
Both city composites were also higher in July year-on-year, even
if marginally; the 10-City was up 0.6 percent from July 2011, and
the 20-City was up 1.2 percent in that same period.
Both composites have climbed roughly 7.5 percent from the cycle
lows they each set earlier this year.
"The positive news in both the monthly and annual rates of
change in home prices over the past few months signals a possible
recovery in the housing market," Blitzer said.
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