A surprisingly strong rebound in California's real estate market helped lift a key home price index for the eighth month in a row.
That's good news for people who plan to sell their homes this spring. Prices are now up almost 4 percent from the bottom in May 2009, but still almost 30 percent below the May 2006 peak.
Prices rose 0.3 percent from December to January on a seasonally adjusted basis, according to the Standard & Poor's/Case-Shiller 20-city home price index released Tuesday. Prices increased in 12 cities in the index.
The biggest monthly gain was in Los Angeles, where prices rose 1.8 percent from December. And real estate agents say there's a distinct sense the worst of the downturn is over.
Buyers are "seeing that prices are creeping up," said Tony Middleton, a real estate agent with ZIP Realty who concentrates on the San Fernando Valley. "They're losing bids on homes and they have to bid again."
Prices in San Diego, meanwhile, rose by almost 0.9 percent. Phoenix had the third-largest gain at 0.8 percent.
Compared with the same month last year, the 20-city index was off just 0.7 percent from last year at a reading of 146.32. That was the smallest decline in almost three years and in line with analysts' expectations, according to Thomson Reuters.
Rising home prices also could boost consumer optimism. For most Americans, their home is their largest asset, so as values climb from the depths of the housing bust, homeowners feel wealthier and more comfortable spending. And, for homeowners who owe more on their mortgages than their properties are worth, rising prices rebuild equity.
Consumer confidence rebounded in March after a February plunge, according to a survey released Tuesday. The Conference Board's Consumer Confidence Index rose to 52.5 in March, recovering about half of the nearly 11 points it lost in February.
Still, shoppers remain cautious and there are signs that last year's housing rebound won't last. Home sales sank during the winter, and government incentives that have propped up the market are ending.
Another reason for the positive news is simply that the Case-Shiller index measures a three-month average of home prices. So January's report included November's strong home sales.
However, bargain-hunting homebuyers continue to pack open houses in California, often facing off with investors for foreclosed homes.
"We're seeing multiple offers in most of the markets here in the San Francisco Bay area," said David Kerr, an agent with ZipRealty in Oakland, Calif. "People are getting off the fence."
In February, bank-owned properties made up 44 percent of all resales in the state, according to MDA DataQuick. In Southern California, they accounted for more than half of resales.
With such high demand, supply is dwindling, driving prices higher.
Meanwhile, the state's unemployment rate has flat-lined of late, and that's made buyers more comfortable about purchasing a home than they were just six months ago, said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California.
California home sales will likely get a boost in coming months thanks to a new serving of government stimulus.
Last week, state lawmakers enacted a tax credit of up to $10,000 for homebuyers that kicks in May 1. The state allotted $100 million for first-time buyers and another $100 million to anyone who buys a newly built home. California had a round of tax credits last year that proved to be popular; that program ended in July.
The latest incentive picks up where a federal first-time homebuyer tax credit of up to $8,000 is scheduled to leave off when it expires at the end of April. Should the Obama administration extend the federal tax break, that could give homebuyers in California even more reasons to buy.
Still, there remain pockets of weakness. Sales of homes priced above $500,000 are sluggish. And despite rising prices, more than one-third of all homeowners with a mortgage still owe more on their loans than their homes are worth, according to First American CoreLogic.
Among the cities showing monthly price declines in January, the biggest drop was in Portland, Ore., where prices fell 1.8 percent from December. Chicago and Seattle saw declines of 1.7 percent, while prices in Atlanta fell 1.5 percent.
Many analysts expect the Case-Shiller 20-city index will again turn downward in the coming months as more foreclosures in other states hit the market.
"It is only a matter of time before the index records a double-dip in prices," wrote Paul Dales, U.S. economist with Capital Economics, who forecasts a 5 percent drop. The market will be tested in the second half of the year, he wrote, when a tax credit that has boosted sales is gone.
The Case-Shiller index measures home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices increased 50 percent since the beginning of the index.
Alan Zibel reported from New York.
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