Home prices climb for 2nd straight quarter

S&P/Case-Shiller index shows prices up 3.1% from 3 months earlier, but down nearly 9% from a year ago.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Les Christie, CNNMoney.com staff writer

How has the $787 billion stimulus package affected the economy?
  • It has aided a recovery
  • It has made the situation worse
  • It has had no impact
  • It's too soon to tell
Mortgage Rates
30 yr fixed 3.80%
15 yr fixed 3.20%
5/1 ARM 3.84%
30 yr refi 3.82%
15 yr refi 3.20%

Find personalized rates:

Rates provided by Bankrate.com.

NEW YORK (CNNMoney.com) -- Home prices rose for the second consecutive quarter but remained nearly 9% lower than a year earlier, according to a housing market report issued Tuesday.

Prices nationwide rose 3.1% in the three months ended Sept. 30, according to the S&P/Case-Shiller Home Price Index, a closely watched gauge of housing market direction. That followed a similar 3.1% rise during the second quarter of the year.

Prices were still below a year ago, however, down 8.9% compared with the third quarter of 2008. Nevertheless, that's an improvement from the double-digit price decreases the index had been reporting; the second quarter year-over-year decline was 14.7%. Prices had dropped 19% year-over-year during the first quarter of 2009.

"We have seen broad improvement in home prices for most of the past six months," says David Blitzer, Chairman of the Index Committee at Standard & Poor's.

The Case-Shiller 20-City Composite index posted its fifth monthly increase in a row in September, rising 0.3% from August levels.

The worst performing market continued to be Las Vegas, where prices have dropped for 37 consecutive months. They're now 55.4% off their highs.

Midwestern cities staged a comeback in September, with Minneapolis and Detroit prices each gaining 1.8%, the most of any of the 20-cities covered. Chicago prices jumped 1.2%; San Francisco climbed 1.3%; and Los Angeles and Phoenix both rose 0.8%.

Stopping the home price slide is an important factor in any economic recovery. Falling prices increase the number of "underwater" homeowners, those who owe more on their mortgage balances than their homes are worth.

Underwater mortgage borrowers are much more likely to lose their homes to foreclosure. Indeed, it's a crucial factor in whether people lose their homes or not, as Mark Goldman, a San Diego State University real estate professor pointed out.

"If they have a home worth $300,000 and they owe $250,000 and can't pay their mortgage, they'll just sell the house," he said.

It's when they have a house worth $200,000 and they owe $250,000 that these people default, because the sale of the house would not pay their whole debt.

A report from First American CoreLogic released Tuesday, revealed that nearly a quarter of all mortgage borrowers are underwater. That, as well as the ongoing foreclosure problem, has contributed to doubt about the staying power of the recent price trend.

"I think it's temporary," said Pat Newport, a real estate analyst with IHS Global Insight. "I can't see home prices stabilizing as long as we have that problem."

According to Newport, foreclosures could worsen over the next several months as many toxic loans go through resets, making them much less affordable for their borrowers.

A significant contributor to the improvements in the housing markets have been programs such as the tax credit for first-time homebuyers, according to Bob Walters, the chief economist for Quicken Loans.

"[But] the real driver in all of this -- from home sales to home pricing appreciation -- has been the protracted run of favorable mortgage rates," he said. "It will be interesting to see how home prices react when we see rates begin to increase, as they are sure to do over time."  To top of page

Find mortgage rates in your area

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.