Housing Prices Rise at Low End
The housing market continues to gather strength, and the biggest gains in price now appear to be among the least expensive homes, whose values fell the most in the downturn and have weighed against any would-be recovery.
Over all, the Standard & Poor’s Case-Shiller index showed an annual gain of 1.2 percent in the price of single-family homes across 20 cities in July, according to data released Tuesday. In addition, all 20 cities showed price increases from the previous month, the third monthly gain in a row, supporting the idea that the nation’s housing market has bottomed out and, some analysts said, contributing to an unexpected bump in consumer confidence.
Luxury homes lost less value in the housing crisis and began to rebound more quickly, but lower-price homes are catching up, rising slightly faster in value than homes in the middle and upper tiers, according to an analysis of the Case-Shiller data by Patrick Newport and Michelle Valverde of IHS Global Insight, a private research firm in Lexington, Mass.
The typical lower-price home rose at an annualized rate of 1 percent from June to July on a seasonally adjusted basis. The middle tier posted a one-month gain of 0.4 percent, and the highest tier inched up by 0.1 percent.
In the last three months, Mr. Newport said, the lowest tier has been rising in value more than twice as fast as the other two categories. For the least expensive homes, “prices just shot up too fast on the way up and then went down more sharply,” he said. “We’re seeing the correction from that.”
The price cutoffs for each tier vary widely depending on the city. The cutoff for the lowest tier ranges from $86,000 in Atlanta to $349,000 in San Francisco.
Other data supports the trend. According to a report from Zillow, a real estate Web site that divides homes into three price groups, the gap in price changes between the top and the bottom of the market is narrowing. “It’s less that the top tier is cooling than that the bottom tier is strengthening,” said Stan Humphries, chief economist at Zillow. “The bulk of the recovery is due to the changes in the bottom and middle tiers.”
Even in Las Vegas, where housing prices are still slightly down over the last year, lower-end homes have ticked up in value, which may be good news for sellers but can be a hurdle for buyers. Mark Graham, a youth pastor who has been looking for a house for his family there for months, said buying a home for less than $150,000 could be a challenge.
“Houses are going on the market and within a day have multiple offers already on them,” Mr. Graham said, adding that most of the offers were from investors who did not need financing. “It’s more or less a heartbreaking market, because you get your heart set on a house, and then someone walks in with cash.”
Not every market is showing improvement on the low end, according to Case-Shiller. Atlanta and Chicago are still lagging, but in places like Boston and San Diego, the bottom third of houses are doing better.
“The majority of the cities have been more like Boston and San Diego,” said Maureen Maitland, a vice president at S.& P. Dow Jones Indexes, which produces the Case-Shiller index.
In Phoenix, which has shown the strongest recovery in housing prices of the 20 cities surveyed, the lowest third — homes under $127,000 — gained 33.5 percent from July 2011 to July 2012, while the top tier — homes above $211,000 — posted an 11.5 percent increase in that period.
Prices have been bolstered by a decline in the number of foreclosure sales and strong interest from investors, who are buying low-price properties and converting them to rentals.
In the Sarasota, Fla., area, investor demand has driven up prices for lower-end homes, said Roxanne Moore, a real estate agent with Green Lion Realty there.
“Investors are finding properties that they used to be able to buy for $80,000 or $90,000 are now going for $100,000,” she said. In addition, after a long absence, first-time home buyers are beginning to trickle back in.
Over all, home values in the first seven months of the year rose 5.9 percent, the best year-to-date performance in seven years. Nevertheless, the broad housing market is still nearly 30 percent below its high in 2006.
In four cities — Atlanta, Chicago, Las Vegas and New York — prices are lower than they were a year ago. In New York, including the surrounding suburbs, prices increased 1.2 percent from June to July, but remain 2.6 percent lower than they were in July 2011. Prices at the low end of the market — houses below $271,000 — have dropped 3.9 percent in the last year, while high-end homes — $437,000 or more — have dropped 2.5 percent.
But in an optimistic sign, consumer confidence rose in September to its highest level since February, according to a report released Tuesday by the Conference Board, a private group.
The consumer confidence index reached 70.3 points, well above economists’ expectations of 63 and a significant improvement from the upwardly revised level of 61.3 in August. Some analysts attributed the bump to gains in the stock market, while others credited the improved outlook for housing.
Source: New York Times