More Signs of Rising Home Prices

Further signs of a strengthening housing market were reported today, even as other indicators suggest that the overall economy is slowing down.

U.S. home prices rose for a third consecutive month in May, according to figures released today by the data firm CoreLogic, increasing by 1.8 percent over their April level. On an annual basis, prices were up 2.0 percent from May 2011.

Excluding distressed properties such as foreclosures and short sales, prices were up by 2.3 percent for the month and 2.7 percent from their May 2011 level.

Further gains expected

Looking ahead, the company predicts an additional 1.4 percent increase in overall home prices in June, with a 2.0 percent gain when distressed sales are excluded, according to figures from its index of pending home sales, based on signed sales contracts for sales that have not yet been finalized.

“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 Anand Nallathambi, president and chief executive officer of CoreLogic. “Tighter inventory is contributing to broad, but modest, price gains nationwide and more significant gains in the harder-hit markets, like Phoenix.”

Biggest increases among modestly priced homes

Price gains are most pronounced at the lower end of the housing market, according to Mark Fleming, CoreLogic chief economist. Over the past year, homes in approximately the bottom third of the market saw prices rise by 5.8 percent, while those in roughly the upper third saw a gain of only 1.8 percent.

The CoreLogic figures are the latest among a number of recent reports pointing to a strengthening housing market. Other reports in the past two weeks have seen a rebound in home prices in the S&P/Case-Shiller indices, increasing pending home sales reported by the National Association of Realtors and higher new home sales reported by the Census Bureau.

Slowdown in the works?

At the same time, other indicators are pointing to a slowdown in the overall economy. Consumer confidence is down, while manufacturing output fell in June for the first time in three months. That’s a particularly worrisome indicator for the economy at large, because manufacturing is considered a leading indicator for overall economic conditions.

At the same time, housing and new home sales in particular are considered strong drivers of the economy, so at this point it’s hard to say which trend is the true indicator of the economy’s direction at this point.

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