Archive for September, 2011

Home Sales Down, Prices Up in Second Quarter

Tuesday, September 6th, 2011

Home prices across the U.S. rose 3.6% in the second quarter, indicating that home prices could be picking up some steam.

For the second quarter, the S&P/Case-Shiller 20-city index of national home prices saw a surprising increase on a seasonally adjusted basis after falling 4.1% in the first three months of the year. Across the U.S. home prices are back to early 2003 levels, the report showed. Still, the national home price index was 5.9% lower in the second quarter than in the year-earlier period.

In the month of June, both the 10-city and 20-city composite showed 1.1% increases in June, though annual rates were lower by 3.8% and 4.5%, respectively.

Economists had been expecting the index to fall 4.7% in June, according to consensus estimates listed on

The S&P/Case-Shiller 20-city index is a moving three-month average, so data for June was swayed by data from April and May.

“This month’s report showed mixed signals for recovery in home prices. No cities made new lows in June 2011, and the majority of cities are seeing improved annual rates,” said David M. Blitzer, Chairman of the Index Committee at S&P Indices, in a statement. “Looking across the cities, eight bottomed in 2009 and have remained above their lows. These include all the California cities plus Dallas, Denver and Washington DC, all relatively strong markets.”

Blitzer continued: “At the other extreme, those which set new lows in 2011 include the four Sunbelt cities — Las Vegas, Miami, Phoenix and Tampa — as well as the weakest of all, Detroit. These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together.”

Data released Monday showed that pending home sales fell 1.3% in July, month-over-month, according to a National Association of Realtors report.

The index, which measures the number of contracts signed to buy previously owned homes in the U.S., was 14.4% higher than year-earlier levels, though last summer’s data reflected a large fall-off in home sales after the springtime expiration of homebuyer tax credits. Pending home sales are viewed as an indicator of future home sales since they reflect contracts — not closings — and generally occur with a lag time of one to two months.

Lawrence Yun, chief economist at the National Association of Realtors, on Monday characterized the sales activity as “underperforming.”

“The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” he said. “We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.”

The already-struggling housing market has another 15% decline in home prices already priced in for homebuilder stocks, according to Stifel Nicolaus analyst Michael Widner.

Widner said on Aug. 24 that sentiment is “overly pessimistic,” but “it is unclear to us what near-term catalyst might improve visibility.” He added that “unusually unclear visibility and lack of willingness to own the group given that lack of clarity” has kept valuations among homebuilders cheap across the sector.

The analyst explained that most homebuilders, including Toll Brothers(TOL), which posted a 54% quarterly profit rise last week though revenue missed expectations, are trading at unusually low multiples because of market expectations for “a further 15% decline in national home prices by our estimates.”

Stocks in the homebuilder sector were mixed in premarket trading Tuesday, including the SPDR S&P Homebuilders(XHB) and iShares Dow Jones US Home Construction(ITB) exchange-traded funds that tracks the sector. Even so, the ETFs remain around 70% and 80%, respectively, off their early 2006 peaks.

Among individual builders, PulteGroup(PHM) rose 4.3% ahead of the opening bell, D.R. Horton(DHI) was flat, Lennar (LEN), largely considered a leader among the homebuilders, lost 1% and Toll Brothers(TOL) fell 1% higher. Small-cap builder KB Home(KBH) was also lower, losing 0.8%, while Hovnanian Enterprises(HOV) shares were unchanged.