U.S. home prices, which climbed more than forecast in July, are unlikely to come “roaring” back as the housing market reaches bottom, according to Karl Case, the economist who co-created the S&P/Case-Shiller index.
The gauge of property values in 20 cities rose 1.2 percent from July 2011, the biggest 12-month jump since August 2010, a report from the group showed today in New York. The median forecast of 23 economists surveyed by Bloomberg called for a 1.1 percent gain. The increase followed an advance in June that was the first on a year-over-year basis since a temporary federal tax credit boosted sales in 2010.
The index, while rising, remains about 30 percent below its peak in July 2006. A broader recovery may be hindered by tight lending standards, slow economic growth and a limited supply of properties on the market as Americans choose to stay in their homes rather than sell, Case said. The U.S. unemployment rate was above 8 percent in August for the 43rd consecutive month.
“We’re at a bottom but I don’t think we’ll come roaring out of here,” Case, professor emeritus at Wellesley College in Massachusetts, said today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “You’ve got problems in the economy, problems abroad, and got the demographics to worry about.”
A separate index from the Federal Housing Finance Agency released today showed prices for U.S. single-family houses with mortgages backed by Fannie Mae (FNMA) or Freddie Mac rose 0.2 percent in July from the previous month on a seasonally adjusted basis. The median estimate of 14 economists surveyed by Bloomberg was for a 0.6 percent gain. Prices rose 3.7 percent from a year earlier, the FHFA said.
Sixteen of the 20 cities measured in the Case-Shiller index showed a year-over-year advance, led by a 17 percent increase in Phoenix. Atlanta had the biggest drop, with prices falling 9.9 percent.
Record-low mortgage rates, a smaller share of sales of foreclosed properties and low inventory are boosting prices, Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, wrote in a note to clients today. Further gains may be held back by an overhang of distressed properties from homeowners in default or foreclosure, he said.
“We are expecting prices to continue rising, but not much faster than inflation, at least over the next five years,” Newport wrote.
Robert Shiller, the co-creator of the home-price index, isn’t ready to say the market is at a bottom, Case said. It would take at least a year of price increases to determine there is a recovery in housing, Shiller, a Yale University economist, said on CNBC last week. He didn’t immediately respond to a telephone message seeking comment today.
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