U.S. home prices increased 2% in the third quarter of 2009, adding to the 2% increase in the second quarter, marking the first back-to-back quarterly price gains the U.S. housing market has seen since 2005, according to the Fiserv Case-Shiller Indexes, which are owned and generated by Fiserv and data from the Federal Housing Finance Agency.
Despite the positive performance in the second quarter, the housing market will continue to be buffeted by strong headwinds in 2010 due to large supplies of distressed properties, rising interest rates and high unemployment rates, Fiserv observes. Fiserv Case-Shiller reaffirms its projection of an approximate 11.5% decline in housing prices for 2010.
Existing-home sales jumped from 4.5 million units in January 2009 to 6.5 million in November 2009 – the highest gains since 2006. The largest spring/summer price gains were recorded in markets where huge price declines have dramatically improved housing affordability, such as Chicago; Memphis, Tenn.; and San Jose, Calif.Â
‘It appears that most of the housing demand from first-time buyers was pushed forward to 2009 in anticipation of the November expiration of the home buyer tax credit,’ says David Stiff, chief economist of Fiserv. ‘So, it seems unlikely that the extension and expanded eligibility of the credit through April 2010 will substantially boost demand this year.’
The federal government's Home Affordable Modification Program slowed the flood of distressed properties hitting many of these markets, as mortgage servicers tried to meet the guidelines of the program and ramp up their workout processes, Fiserv says.
‘Unfortunately, most of the factors that propped up home prices in 2009 will be transitory, so I expect that prices will begin falling again during the winter and early spring of 2010 before bottoming out later this year,’ Stiff adds.
Aside from the strong second and third quarters, over the past year, the U.S. housing market continued its price correction, with single-family home prices across the U.S. falling an average of 9% over the 12-month period ending Sept. 30, 2009, the indexes show.