• Lisa Simpson
• Dec 16,2009
• In: Real Estate

Home Prices Increase in the Second Quarter

The real estate sector is in the throes of a crisis. Home prices have increased in the second quarter. But prices are still lower by 9 per cent. This was pointed out by a housing market number. Across the nation, prices increased by 3.1 per cent in the quarter ending September 30. This was revealed by S&P/Case-Shiller Home Price Index, which watches the market.

Prices, however, are yet to be what they were in 2008. Prices are below 8.9 per cent when compared to the third half of 2008. That was, however, an improvement on the double- digit decrease, that was reported in 2008. In the first half of 2009, prices had declined by 19 per cent.

David Blitzer, Chairman of the Index Committee at Standard & Poor’s, says that there has been a marked improvement in prices of homes in the last 180 days.
The problem plaguing the real estate sector is the foreclosures. The worst affected are California, Nevada and Arizona. In fact, the worst market is Las Vegas. Prices in this city have dropped for the last 37 months in a row. The prices are at least 55 per cent lower than what they were earlier. Cities in the Midwest have made a comeback. In fact, Detroit and Minneapolis prices have gone up by 1.8 per cent. In Chicago, prices have gone up by 1.2 per cent, while in Phoenix and Los Angeles prices have increased by 0.8 per cent. In San Francisco, the figure stands higher at 1.3 per cent.

Experts say that recovery could happen only if home prices stabilize. As prices fall, many homeowners get embroiled in negative equity – meaning the prices of homes are much below what the owners owe to the banks. These “underwater” homes, will soon be lost to foreclosure. San Diego State University real estate professor, Mark Goldman, said it is very important that the tide of foreclosure is stopped. It is very crucial for the recovery of the real estate sector. For instance if a house is valued at $200,000, while the homeowners owes $250,000, the person would naturally default. Even if the house is sold, then also it will not be enough to pay the debt.

The First American CoreLogic report has pointed out that nearly 25 per cent of the homes are underwater. Home prices will not stabilize as long as there is a problem.