A rash of positive housing data has given some analysts hope that the housing market has bottomed and an economic recovery is underway. But the soaring unemployment and rising mortgage rates could lead to a double-dip plunge for the housing market.
Home prices rose on a monthly basis in May for the first time in nearly three years, according to the Standard & Poor’s Case-Shiller Home Price Index. The index of 20 metropolitan areas showed a month-over-month increase of 0.5% in May - the first increase in the monthly index since July 2006.
And while housing prices in the 20 cities fell 17.1% year-over-year in May, that’s still an improvement over April’s 18.1% drop. Year-over-year declines in home prices have now lessened for four straight months.
The improvement in the Case-Shiller index followed the release of several equally optimistic government reports that showed increases in home sales and housing starts, and a decline in inventories.
The Commerce Department said Monday that June sales of both new and previously owned homes increased from the previous month. Sales of single-family homes increased by 11% from May to a seasonally adjusted annual rate of 384,000. That made for the fourth increase in six months.
Home construction unexpectedly rose in June as well. Housing starts increased 3.6% from May to a seasonally adjusted 582,000 annual rate. And even while more houses were built in June, the number of available homes on the market went down.
There were an estimated 281,000 homes for sale at the end of June, less than the 293,000 available at the end of May. Additionally, the ratio of houses for sale to houses sold was 8.8 in June, versus 10.2 in May.
Taken together, this data was very encouraging to analysts.
"Recession is over, economy is recovering - let’s look forward and stop the backward-looking focus," Wells Fargo Corp. (NYSE: ) chief analyst John E. Silvia wrote in a research note.
Of course, Silvia may be going a bit too far. The fact that the housing market is "less-bad" doesn’t necessarily mean that the recession is over or that a recovery is underway.
"This is really a lousy market," Patrick Newport, an economist with IHS Global Insight told the Washington Post.
