Return of Optimism for US Housing

The housing market in many US cities is performing better than recently released national data would suggest, leading some analysts and real estate brokers to express cautious optimism about the prospects for a recovery.

AP

List prices rose in 24 of 26 cities tracked by Altos Research in May, with San Francisco, Washington and San Jose, California, showing the biggest gains.

New York and Las Vegas were the only two cities in the index where prices declined.

A separate index compiled by CoreLogic that tracks prices in 6,507 postal codes rose slightly in April compared with March – the first such increase since a homebuyer tax credit that helped prop up the market expired in April 2010.

“It may well be the beginning of a reversal,” said Mark Flemming, CoreLogic’s chief economist.

Home sales tend to pick up in the spring as people try to move before the new school term begins at summer’s end.

As the housing market started to weaken earlier this year, analysts feared that the seasonal bump would not materialise at all – a sure sign of deepening problems that could tip the economy back into recession.

From January through to March, home prices fell so far that they are now back to levels not seen since the middle of 2002, according to the widely watched S&P/Case-Shiller Index.

Slowing job growth and declining consumer confidence added to the perception that the market was worsening.

And yet interviews with realtors in half a dozen cities around the country paint a different picture. They say that the volume of sales and prices started to strengthen in April and have continued to gain momentum through the first weeks of June.

“In January we were checking to see if the phones were still connected,” said Greg Herb, a realtor in south-eastern Pennsylvania.

But after a weak start to the year, pending sales and new inventory grew strongly in May.

No one is suggesting there is a boom under way, only that the market may not be as bad as some recent analysis has suggested.

Most predictions call for at least a 5 percent price decline this year and no bottom until 2012. Despite the hand-wringing, there are encouraging signs.

Erik Weichelt, a realtor in San Diego, said that entry-level homes, priced between $200,000 and $300,000, had become so affordable that “they are really moving”.

California, hard hit by the housing crisis, has seen a notable pick-up. “People are still unsure, because there are a lot of mixed signals,” said Jim Hamilton, the former head of the California Realtors Association. “But, overall, more buyers are coming into the market.”