Housing Prices Increased in June But Expected to Drop
In Los Angeles, prices were up 0.6 percent from May and up 9.2 percent from last year.
The roller coaster real estate market is showing no signs of smoothing out any time soon in the midst of high unemployment, wavering consumer confidence, and tighter lending standards.
The Standard & Poor's/Case-Shiller 20-city home price index released Tuesday posted a 1 percent increase in June from May and was up 4.2 percent from a year ago. Experts attribute the rise to an $8,0000 government tax credit which inspired a burst of home-buying.
In Los Angeles, prices were up 0.6 percent from May and up 9.2 percent from last year. In San Diego, they prices were up 0.4 percent from May and up 11.2 percent from last year. Home prices nationally were up 4.4 percent in the second quarter compared with the first quarter.
But the tax credit has expired and demand is fading. Prices are expected to fall through the rest of the year. Economists at one firm,
IHS Global Insight, project home prices will fall by up to 8 percent and hit the bottom sometime next year.
Adding to the to the bad news: new figures issued Friday show the economy is weaker than expected, and the outlook for the rest of the year is looking bleaker. The Commerce Department reported that gross domestic product grew at a 1.6 percent rate for April through June. The initial estimate was 2.4 percent.
Economists say consumers are saving more and spending less and the unemployment rate remains stuck at almost 10 percent. On top of that, lending standards remain tight and less people are able to qualify for large loans.
Last week, the National Association of Realtors said sales of previously occupied homes in the U.S. fell 27 percent in July, the weakest showing in 15 years. It marked the largest monthly drop in the four decades that records have been kept. Meanwhile, the Commerce Department reported that sales of new homes fell 12.4 percent in July from a month earlier. July's pace was the slowest in at least 47 years.
