“I don’t think we’ve finished with the decline” in the market, said Mark Vitner, senior economist at Wells Fargo.
The weak housing market has become a drag on the economic recovery and any recent signs of improvement have reflected the depth of the market slump rather than genuine strength, analysts said.
The sector’s recovery is further clouded by the debate over raising the federal borrowing limit, said Stuart Hoffman, chief economist for PNC Financial Services Group. If the debt ceiling isn’t raised and the government defaults on its debt, that could cause mortgage rates to rise from their historic lows and scare away more buyers, he said.
“We’re still not out of the basement on housing,” Hoffman said.
Even if the debate over the debt ceiling is resolved, the market will remain weak for some time, analysts said. A backlog of homes headed for foreclosure will keep home prices low and a weak job market will keep many buyers away, they said.
“Sustained increases in home prices over several months and better annual results need to be seen before we can confirm real estate market recovery,” David Blitzer, chairman of the S&P index committee, said in a statement.
The Standard & Poor’s/Case-Shiller home price index showed that housing prices were flat in May on a seasonally adjusted basis. Excluding seasonal factors, prices in the 10-city and 20-city indexes tracked by the report were up about 1 percent — the second consecutive month of improvement.
“This is a seasonal period of stronger demand for houses,” Blitzer said. “The concern is that much of the monthly gains are only seasonal.”
Prices were down 3.6 percent in the 10-city composite index and 4.5 percent in the 20-city composite index compared with the same period last year. Minneapolis saw the biggest price decline, falling 11.7 percent, but home values in Tampa, Fla., and Detroit also tumbled, dropping 9.5 percent and 9.3 percent, respectively.
Home prices in many regions are tumbling after the expiration of a first-time home-buyer tax credit last year, analysts said. But prices in those markets could stabilize soon, said Robert Denk, senior economist for the National Association of Home Builders.
The Washington-area housing market continued to buck the national trend, emerging as the only metropolitan area in the index to see a year-over-year improvement in home prices, which rose 1.4 percent in June compared with the corresponding period last year.
The region’s strong job market, including a high concentration of high-paying, federal, white-collar jobs, has shielded it from the worst of the housing crisis, said Greg Leisch, chief executive of real estate information company Delta Associates.
Meanwhile, new-home sales fell more than analysts expected in June, though prices were up. Sales of new single-family homes fell 1 percent in June to 312,000 on an annualized basis, compared with the previous month, according to Commerce Department data. Sales were were up 1.6 percent compared with the corresponding period a year ago.
Sales fell the most in the Northeast and West, dropping 15.8 percent and 12.7 percent, respectively. Sales in the South, which includes the Washington area, increased 3.4 percent. Sales increased the most in the Midwest, 9.5 percent.
There was one bright spot: New-home prices increased 7 percent in June to $235,200 compared with the same period a year ago.
“We’re bouncing along the bottom,” Denk said.