Why US Home Prices Are Rising Again

Real estate news and analysis from The Wall Street Journal

Why Home Prices Are Rising Again (According to Case-Shiller) | June 26, 2012, 9:58 AM

It wasn’t hard to see this coming: Home prices rose in April after a spring that brought more buyers chasing fewer homes.

Home prices typically show a seasonal gain in April, and Tuesday’s report from the S&P/Case-Shiller index was no different. Home prices were up 1.3% from March for the 20-city index. After adjusting for seasonal factors (more homes generally sell in April), prices were up by 0.7%.

This year was clearly better than April 2011, when monthly prices rose by 0.7%, and when adjusting for seasonality, they fell by 0.1%.

It’s worth remembering that Case-Shiller is a very backwards looking gauge of home prices… Still, the next few reports should be even better, and not just for the normal seasonal reasons:

First, the number of homes for sale has been much lower this year than in the past few years, even though demand has returned to levels last seen in 2010, when tax credits boosted demand and sent prices up. The function of falling supply and rising demand means prices are already going up in more markets. (We wrote about this in April in a piece about the return of “bidding wars” for a handful of markets.)

Second, the share of homes selling out of foreclosure has fallen. This “distressed share” is important for home-price indexes that measure repeat sales, such as the Case-Shiller index.

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