US home prices pick up in May

Home prices in the US climbed higher than expected in May as the housing market benefited from the last drops of federal stimulus ahead of summer, but tumbling consumer confidence showed growing fears about the economic recovery.

The closely watched S&P/Case-Shiller index showed house prices in the biggest US cities had risen 4.6 per cent in May from the same month a year earlier. That was stronger than economists had predicted and marked the biggest year-on-year increase since 2006.

“While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still does not indicate that the housing market is in any form of sustained recovery,” said David Blitzer, chairman of S&P’s index committee. “Since reaching its recent trough in April 2009, the housing market has really only stabilised at this lower level.”

From April to May, prices rose consistently across the 20 key markets that Case-Shiller tracks. May is traditionally one of the busiest months for buying homes, and only Las Vegas, where prices have fallen by 6.5 per cent in the past year, registered a monthly decline.

Mr Blitzer cautioned that home prices could “bounce along the bottom for the foreseeable future” and that the expiration of stimuli such as the first-time homebuyer tax credit, which affected house purchases that closed before the start of July, could weigh on the sector.

Home sales and housing starts have both been weak in recent months and high rates of foreclosure and distressed sales are depressing prices.

Read more here>