By Mike Colpitts
Home prices rose for the third straight month in May across the U.S., according to real estate analytics company CoreLogic. On a year over year basis the firm said average prices rose 2.0%, and also increased 1.8% compared to a month earlier.
The firm’s Housing Price Index, which tracks 100 of the nation’s top urban markets, including distress sales, which are foreclosures and short sales, indicates that house prices “will rise at least another 1.4% from May through June.” The index is a new metric introduced in April to provide the most current details and trends in home prices based on Multiple Listing Service (MLS) data it collects from associations throughout the U.S.
Home values are rising quicker in the lower priced sector of the market, which is typical for a recovery in housing. “Home prices below 75% of the national median (home price) increased 5.7% from a year ago compared to only a 1.8% increase for prices 125% or more of the median,” said CoreLogic chief economist Mark Fleming.
The increase in home prices were led by some of the states which have been the hardest hit in the foreclosure crisis, with Arizona showing the highest appreciation at 12% on an annual basis. Idaho placed second (9.2%), followed by South Dakota (8.7%), which was relatively unscathed in the housing downturn. Montana (8.2%) and Michigan (7.9%) rounded out the top five.
Anand Nallathambi, the chief executive officer of CoreLogic may be the most optimistic CEO in the real estate industry. “The recent upward trend in U.S. home prices is an encouraging signal that we may be seeing a bottoming of the housing down cycle,” said Nallathambi. “Tighter inventory is contributing to broad, but modest, price gains nationwide and more significant gains in the harder hit markets, like Phoenix.”
However, banks and mortgage finance companies are holding on to a massive back-log of homes and other properties that have not yet been foreclosed, but are in default. The inventory is estimated to be any where from 1.6 million to more than 6-million homes and other residential properties. The back-log would be devastating for the housing market if it was listed for sale at one time, but lenders are carefully engineering when they are placing the properties on the market in efforts to push home values higher.
Despite the rosy news delivered by the firm, there are still several states suffering severe housing deflation, including Delaware, where home prices have fallen another 9% in the past 12 months. Rhode Island, Illinois, Georgia and Alabama have also sustained deflation averaging at least 4% during the year.
However, of the 100 cities tracked by the firm, only 29 showed year over year declines in May, 12 fewer than during April.