Case Shiller: Housing Inks Another Uptick

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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 changes.

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 markets."

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 January 2000.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: ITB , XHB

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