Home prices in 20 cities rose for a fourth straight month in September, pointing to an improvement in real estate that's helping the economy emerge from recession.
The Standard & Poor's/Case-Shiller home price index increased 0.27% from the prior month on a seasonally adjusted basis, after a 1.13% rise in August, the index's publishers said Tuesday.
The gauge fell 9.36% from September 2008, more than forecast, yet it was the smallest year-over-year decline since the end of 2007.
"The worst of the rate of home price declines has passed, but a strong recovery is not expected," Steven Wood, the president of Insight Economics LLC in Danville, Calif., said before the report.
Economists forecast the 20-city home price index would decline 9.1% from September 2008, after a previously reported 11.32% drop in the 12 months ended in August, according to the median forecast of 30 economists in a Bloomberg News survey. Estimates ranged from decreases of 8.3% to 10.3%. Year-over-year records began in 2001.
Nineteen of the 20 cities in the S&P/Case-Shiller index showed a smaller year-over-year decline than in August.
Compared with the prior month, nine of the 20 areas showed an increase, while 10 had a decline. The biggest month-to-month gains were in Detroit and Minneapolis, which both increased 1.8%.
Existing-home sales in October rose to the highest level in more than two years, National Association of Realtors data showed Monday. The median sales price decreased 7.1% from a year earlier, the smallest decline in more than a year.
To ensure the recovery in housing continues, President Obama and Congress this month extended a tax credit of as much as $8,000 for first-time homebuyers until April 30, from Nov. 30. They also expanded it to include some current owners.
Concern about the looming expiration of the credit earlier this month weighed on builder sentiment and may have been the reason the Mortgage Bankers Association's purchase applications index fell to a 12-year low in the week ended Nov. 13. The bankers group is scheduled to release last week's applications report today.
While the erosion of house prices is starting to end, it will take "a considerable amount of time" for the housing market to recover fully, Sandra Pianalto, the president of the Federal Reserve Bank of Cleveland, said in a speech Nov. 17.
"Though we have seen some signs that the worst may be over, the housing industry is not out of the woods yet," Pianalto said at a housing conference sponsored by the Ohio Housing Finance Agency and Ohio Capital Corp. for Housing. "Nor is the broader economy."
Almost 23% of U.S. homeowners in the third quarter owed more on their mortgages than their properties are worth, according to First American CoreLogic, a unit of First American Corp. of Santa Ana, Calif.
Karl Case, an economics professor at Wellesley College, and Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, created the home price index.