By Alejandro Lazo, Los Angeles Times –
LOS ANGELES — A key index of home prices in American cities turned positive in April, signaling that the housing slump may be turning a corner nationally despite considerable weakness in some hard-hit metropolitan areas.
Notching the first gain after seven months of declines, the Standard & Poor’s/Case-Shiller index of 20 large cities rose 1.3 percent in April over March. The index was still down 1.9 percent compared with April 2011, although that was the smallest year-over-year decline since November 2010.
Economists were optimistic that the uptick in prices was significant and that real estate may be contributing again toward building American wealth. But the rise in housing values also comes at a delicate time for the U.S. economy, with fears about an impending fiscal crisis at the end of the year beginning to hurt job growth domestically and concerns abounding over a broader global slowdown.
“The pieces of the housing recovery are falling into place,” said Stuart Gabriel, director of the Ziman Center for Real Estate at the University of California-Los Angeles. “But it is a housing recovery in the context of synchronous slowing in the major global economies, and that is where the trickiness lies.”
A healthy recovery will require improvements in jobs, incomes and consumer confidence, Gabriel said, and those underpinnings don’t look as strong as they did just a few months ago. On Tuesday, an index of national consumer sentiment showed a decline to 62 in June from 64.4 in May, the fourth consecutive drop.
Home sales this year have surged after last year’s lackluster performance. Rock-bottom interest rates and cheap prices have helped boost affordability, even as homeownership has sunk to levels not seen in 15 years.
Foreclosures, which drag down prices, have made up a smaller share of the market this year. In places such as California, the move-up market has shown signs of stirring to life. And an unexpected shortage of homes for sale has driven competition among buyers.
But whether housing can hold for the long term depends in part on job creation as well as the willingness and ability of U.S consumers to take on more mortgage debt. And despite the recent improvements in real estate, economists don’t expect a big rebound in prices, nor do they anticipate that housing will play a huge role in the broader recovery through consumer spending.
“The key connection between rising home prices and consumers’ spending is home equity extraction via bank lending,” Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in an analytical note. “That business is not coming back in size any time soon, no matter what happens to home prices.”
In April, 19 out of the 20 cities tracked by the Case-Shiller index managed to post a gain over March. Only Detroit stumbled, down 3.6 percent.
Compared with April 2011, half of the cities rose and half fell. Some slipped badly, most notably Atlanta, which fell 17 percent from April 2011. Phoenix, which has undergone a startling housing rebound this year, showed the strongest year-over-year improvement, up 8.6 percent.