In a sign that the U.S. housing market is recovering, home prices rose for the second straight month in May, according to an industry report issued Tuesday.
Home prices climbed 2.2 percent compared with a month earlier, according to the S&P/Case-Shiller 20-city home price index. Prices are still off 0.7 percent compared with May 2011, but that's the lowest year-over-year decline in 18 months, according to David Blitzer, a spokesman for S&P.
The report gave support for industry experts who have been saying that the long-awaited housing market recovery is underway. But Blitzer sounded a note of caution.
"We need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall," he said.
Adjusted for seasonal effect, the price gain shrank to 0.9 percent, but that's still a strong increase.
The roller coaster ride for home prices took them up 106.5 percent between January 2000 and their high of July 2006. After they peaked, prices lost more than 34 percent of their value. The gains of the last two months have pared that loss to 33 percent.
All 20 cities in the index posted positive returns, led by Chicago, where prices rose a whopping 4.5 percent month-over-month. In Atlanta, prices had dropped 17 percent over the 12 months ended in April, but it turned that around in May with an increase of 4 percent.
Other big winners were San Francisco, up 3.9 percent, and Minneapolis, where prices rose 3 percent. The smallest gain was recorded by Detroit, where prices inched up 0.4 percent. Phoenix posted the best annual return by far, up 11.5 percent.
"Investor money has come in to some of the hard-hit markets like Phoenix and Florida cities," said Mike Larson, a real estate analyst with Weiss Research.
That has helped stabilize housing by shrinking inventory.
The strength of the gains was unexpected. A panel of experts put together by Briefing.com had projected a year-over-year decline of 1.8 percent but the big jump in May prices led to the more modest 0.7 percent dip.
Larson pointed out that Case-Shiller is a lagging housing market indicator. It is a three-month rolling average through the end of May, so some of the data is almost five months old. Back then, the overall economy seemed to be on the upswing and unemployment was dropping.
Those improvements have flattened out. The unemployment rate actually ticked up in May to 8.2 percent and stayed at that level in June.
"Momentum will fade as we enter the summer months," said Larson. "The broad economy can't seem to generate much growth."
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