Recent data about homes prices reaching bottom and starting to trend up continue to grow. The real estate website Zillow.com report shows that home prices rose 2.1 percent for Q2 compared to the first quarter. Furthermore, the year-over-year increase of 0.2 percent -- a median price of $149,000, represents the first annual increase in five years.
Even with four straight months of rising home values, prices remain 24 percent below April 2007 median price, according to the Zillow report.
Stan Humphries, Zillow’s chief economist, pointed to the possibility of a bottom and some “organic strength” in the market because of the recovery despite a sluggish job market. In 2011, the real estate data firm predicted the market would turn up late this year.
Supported by Other Indexes
The S&P/Case-Shiller Home Price Index also shows home values climbing 1.3 percent in April. This makes it the first month-over-month increase in seven months. Unlike other home price indexes, such as Case- Shiller or the Federal Housing Finance Agency, Zillow does not include data for foreclosure or bank owned property sales.
However, Zillow’s survey does include short sale transactions. According to Humphries, Zillow targets its index to conventional home sellers to help them make good decisions about putting their homes on the market.
Indexes that include foreclosed home sale transactions show larger decreases in home values. For example, the Case-Shiller index registered a 34 percent drop in home values compared to 24 percent computed by the Zillow survey.
Areas Measured by Survey
The Zillow survey encompasses 167 metro areas. Although home prices increased in less than one third of the areas consisting of 53 housing markets, the price gains counter balanced losses incurred in the other two-thirds of the market. Phoenix realized the largest gain as year-over-year home median value rose 12.1%. In the second quarter, median prices in Phoenix climbed six percent the $136,200.
The Miami-Fort Lauderdale, Florida metro area posted the second largest gain in median home prices, increasing 6.4 percent to $148,300 compared to the prior year.
The following cites fill out the top five:
- Denver, CO: 3.5 percent, an average of $211,300
- San Jose, CA: 3.4 percent, an average of $566,400
- Pittsburgh, PA: 3.3 percent, an average of $108,700
Of the 30 most populous metro areas, Chicago median home price decreased the most, losing 5.8 percent ($158,600). Atlanta median price dropped 4.9 percent ($107, 900) and St. Louis, 4.0 percent ($121,600).
Foreclosures Concern
Besides concerns about the job market, an increase in the volume of foreclosures could stall a recovery in the residential real estate market. Foreclosures have trended down since the start of 2012 -- from a rate of 7.9 foreclosures out of every 10,000 homes to 5.8. Foreclosure sales have also declined, falling to 15.6 percent of sale transactions in June compared to 18.8 percent in February.
Humphries said the settlement reached between the five major banks and government negotiators earlier in the year will increase the foreclosure rate. One key to keeping upward momentum in the housing market depends on the number of foreclosures. In addition, how the housing market absorbs additional foreclosure inventory will play a significant role.