US home prices show strong annual gains, but market still subject to monthly falls

Latest index shows that sales are still strong

Home values in the US fell for the first time in nine months in August, declining 0.1% month on month, according to one of the latest indices to be published but another shows national median prices rising.

The monthly decline shown by the Zillow Home Value Index may just be a blip, however, as the data also shows that values are still up year on year, up 1.7% compared with August 2011.

According to the Zillow data major markets that saw home values edge downward from July to August after experiencing prior increases included Chicago down 0.7%, New York down 0.3% and Boston down 0.2%.

Home values continued to climb in the Phoenix where they were up 1.6% and Miami Fort Lauderdale with a rise of 1%, although the rate of increase was smaller in August.

In the rental markets rents are continuing on their upward trend, climbing 0.2% month on month and 5.9% year on year, the Zillow Rent Index shows.

Nationally, rents have increased in seven out of the past 12 months. Rents rose by 12.8% in Chicago, by 12.4% in Baltimore and by 10.5% in Philadelphia.

‘Home values took a small hit in August, but this shouldn’t be cause for alarm. The back half of the year is always softer than the front half, and this year is no exception,’ said Zillow chief economist Stan Humphries.

‘We’ve been encouraging folks to focus on the longer term trends and not monthly blips. Home values will rise a little and fall a little, month by month, in the near future, but we believe the overall trend will remain positive albeit still below normal rates of appreciation,’ he added.

The index also shows that foreclosures continued to decline in August, with six out of every 10,000 homes in the country being foreclosed. That was down from 6.4 out of every 10,000 homes in July.

But sales are still strong, according to the latest index from the National Association of Realtors and prices are up. It shows that existing home sales continued to improve in August, up 7.8% to a seasonally adjusted annual rate of 4.82 million in August from 4.47 million in July, and are 9.3% higher than the 4.41 million unit level in August 2011.

It also shows national median prices are increasing, up for the sixth month in a row on a year on year basis. The national median existing home price for all housing types was $187,400 in August, up 9.5% from a year ago.

The last time there were six back to back monthly price increases from a year earlier was from December 2005 to May 2006. The August increase was the strongest since January 2006 when the median price rose 10.2% from a year earlier.

Lawrence Yun, NAR chief economist, said favourable buying conditions are keeping the real estate market going.

‘The housing market is steadily recovering with consistent increases in both home sales and median prices. More buyers are taking advantage of excellent housing affordability conditions,’ he explained.

‘Inventories in many parts of the country are broadly balanced, favouring neither sellers nor buyers. However, the West and Florida markets are experiencing inventory shortages, which are placing pressure on prices,’ he added.

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