SoCal Mortgage Blog

Falling home prices have been the norm for some time. Now, a momentary respite is at hand.

Home prices on a monthly basis rose in both April and May, according to the Case-Shiller Index, a widely followed measure of housing prices. Tuesday's release of the index for June is expected to extend that run to a third gain. This should provide the battered housing sector with some hope.

Still, investors shouldn't get too giddy.

For one thing, the yearly change in the index is a better measure of where prices are going.

Things aren't as rosy on that front. According to a Federal Housing Finance Agency report last week, prices dropped 0.6% in the second quarter from the first quarter and fell 5.9% from last year's second quarter. On a monthly basis, prices were up 0.9% in June.

The Case-Shiller index is expected to mirror those numbers. On a yearly basis, prices are still falling; a Dow Jones survey pegs the fall at 4.6%. The monthly gain is nice, but typical: The same pattern occurred last year, when prices rose into the summer, only to fall back later in the year.

The June Case-Shiller indexes should show "their largest month-over-month increases in a year, perhaps longer," Quinn Eddins, director of research at Radar Logic, writes, "but they will remain well below their June 2010 levels. We expect them to begin to decline again in two or three months."

Mr. Eddins notes that the firm's own Residential Property Index tends to increase on seasonal factors and reach a peak in midsummer.

"As such, we are not likely to observe additional appreciation this year," Mr. Eddins says. Any continued increase in Case-Shiller's 10-city and 20-city indexes would still be only minor improvements. Home prices are down about 33% from their peak. It will be a long, slow climb back out of that hole.

That is especially the case since, even with falling prices and low interest rates, buyers remain scarce in many areas. Or their numbers can't match the supply of unsold homes still on the market.

This may prompt the Obama administration to propose fresh support measures for the market. The trouble is, these may only transfer more housing losses to taxpayers and may fail to resuscitate prices.

With housing, there is no easy, or quick, fix.

By: Paul Vigna