By Alan Zibel
AP Real Estate Writer
Washington — The summer’s trend of rising home prices is flattening as the traditional home shopping season ends, two reports Tuesday showed.
The Standard & Poor’s/Case-Shiller home price index of 20 major cities rose 0.3 percent to 144.96 in September, the fourth monthly increase in a row. The seasonally adjusted index is now up more than 3 percent from its bottom in May, but still 30 percent below its peak in April 2006.
Another reading of home prices published by the Federal Housing Finance Agency held steady from August to September. Analysts expect prices to dip again this winter as foreclosures increase.
“As long as the unemployment rate stays elevated, you’re going to see pressure on the pace of foreclosures, which are going to find their way back onto the market, depressing prices,” said Dan Greenhaus, chief economic strategist with Miller Tabak & Co.
Home prices are regarded as a key ingredient to rebuilding the economy.
Homeowners feel wealthier when their property appreciates in value and are more likely to spend money. Rising prices also help millions of homeowners who owe more to the bank than their homes are worth.
Roughly one in four homeowners is in that situation, according to First American CoreLogic.
While prices nationally are likely to keep rising through November, “we are very worried about the potential for a huge wave of supply next year, both from private sellers and banks,” according to a note attributed to Ian Shepherdson, chief U.S. economist at High Frequency Economics. “Prices could easily reverse their recent gains.”
Home prices rose in 11 major cities with the strongest gains in San Francisco and Minneapolis, according to the Case Shiller report. Prices fell by the most in Las Vegas and Cleveland.
Compared with a year earlier, the 20-city index was down 9.4 percent, the smallest year over year decline since January 2008.
“With housing remaining an albatross around the economy’s neck, nothing would perk things up more than some increases in home prices,” according to a note attributed to Joel Naroff, chief economist at Naroff Economic Advisors. “That seems to be happening.”
The price reports came a day after a report by the National Association of Realtors showed that home resales surged by more than 10 percent in October as buyers took advantage of a special tax credit for first-time buyers.