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Existing Home Sales Buoyed by Tax Credit, But Pricing Still Under Pressure

Source: WSJ

Posted on 25 May 2010

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Home prices in the U.S> rose 2% in the first quarter from prior-year lows, according to the S&P Case-Shiller broad National Index, the first year-to-year increase in several years. However, prices were down 3.2% from the end of last year as tax incentives drew to a close and foreclosures continued to rise.

Prices fell month-to-month for the sixth-straight month. David Blitzer of S&P said, "The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices." He also said, "It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax incentive ended on April 30th, we don't expect to see a boost in relative demand."

The housing market is in the midst of a fragile recovery, with recent sales supported by the federal tax credit and low mortgage rates. Home resales rose a more-than-expected 7.6% in April, according to National Association of Realtors.

Prices in 10 major metropolitan areas were up 3.1% in March from a year earlier, according to the S&P Case-Shiller readings, while the index for 20 major metropolitan areas rose 2.3%. Compared with February, they fell 0.4% and 0.5%, respectively. Adjusted for seasonal factors, the indexes declined by the same percentages.

Eight metro areas posted new price lows in March: Atlanta, Charlotte, Chicago, Detroit, Las Vegas, New York, Portland and Tampa.