June home prices up 1.4%, index says; consumers rosier

LITTLE ROCK — Home prices across most of the country have started to rise from the depths of the housing slump, according to new figures released Tuesday.

Nationally, prices in the second quarter posted their first quarterly increase in three years,according to the widely watched Standard & Poor's/Case-Shiller's U.S. National Home Price Indices.

"It is real and it looks like a turn,'" said Karl Case, an economics professor at Wellesley College and co-creator of the index. "It's not going down anymore, and it's beginning to comeup. That's very good for the future of this financial problem."

The index does not measure prices of homes sold in Arkansas, so it does not translate specifically to the state, said John Shelnutt, administrator for economic analysis and tax research for the state's Department of Finance and Administration.

But it does suggest that prices nationally and in Arkansas could rise sooner than most economic forecasts predict, Shelnutt said.

"Arkansas never had much of a bubble to begin with on [housing] prices," Shelnutt said. "But maybe [rising home prices] could come earlier in Arkansas compared with the rest of the nation."

Home prices measured by the index climbed 1.4 percent in June from the previous month, the second consecutive monthly gain and the biggest since June 2005 after a 0.6 percent gain in May.

For the second quarter, the national Case-Shiller index rose2.9 percent, the first quarterly increase in three years. The quarterly index is down 14.9 percent in the past year.

While home prices are still 30 percent below the mid-2006 peak, their new direction should bring relief to both lenders and homeowners.

Falling property values have wiped out $4 trillion in homeowner equity. Lenders have written off billions of dollars in bad loans and have sold foreclosed homes at a fraction of their former cost.

But lower prices and government stimulus efforts have made houses more affordable for first-time buyers, spurring increases in sales that have pared the number of available properties. Gains in housing and stock prices will speed the process of restoring the record loss of wealth that has shackled consumer spending, which accounts for 70 percent of the economy.

"The sharp free-fall in prices is over," said Michelle Meyer, an economist at Barclays Capital Inc. in New York.

A report released Tuesday showed that consumer sentiment rose more than expected in August as expectations hit the highest level since the recession began, indications that Americans' pessimism about the economy may be lifting.

The New York-based Conference Board said its Consumer Confidence index rose to 54.1 from an upwardly revised 47.4 in July.

Economists surveyed by Thomson Reuters had expected a slight increase to 47.5.

Still, the index is well below 90, the minimum level associ-SOURCE: Standard & Poor's AP ated with a healthy economy. Anything above 100 signals strong growth.

There are concerns that the momentum behind home prices will stall at the end of November with the expiration of a federal tax credit for first-time homebuyers.

These newbie buyers are snapping up one in every three homes sold.

First-time buyers get a credit of 10 percent of the sales price of a home, up to $8,000.

The credit phases out for singles earning more than $75,000 and couples earning more than $150,000. The real estate industry is lobbying to have the credit extended.

"If the tax credit is making a significant impact, then housing will take a big hit when it expires," said Pat Newport, an economist at IHS Global Insight.

Home prices for the past year are down 6.1 percent, according to the Federal Housing Finance Agency quarterly index, also released Tuesday. The agencyindex is based on repeat transactions for mortgages financed through Fannie Mae, the Federal National Mortgage Association, or Freddie Mac, the Federal Home Loan Mortgage Corporation. It excludes many highend properties, as well as homes bought with riskier mortgages or all cash.

Prices fell in every state except for four in the past year, according to the agency report. The biggest declines - at least 10 percent - were in Florida and in a handful of western states: Nevada, Arizona, California, Hawaii, Utah and Oregon.

The biggest price increases came in North Dakota, Oklahoma and South Dakota.

Information for this article was contributed by J.W. Elphinstone and Alan Zibel of The Associated Press, David Smith of the Arkansas Democrat-Gazette, Kathleen M. Howley and Shobhana Chandra of Bloomberg News and Rex Nutting of MarketWatch.