Home prices rose in July for 3rd straight month

Home prices are continuing to improve, further evidence of the housing market’s growing health.

Prices in July rose 1.6% from June and 0.4% when adjusted for seasonal factors, according to the 20-city Standard & Poor’s Case- Shiller index.

The increases have been broad as prices rose for the third-consecutive month in all 20 cities.

Year over year, Case- Shiller’s data show home prices up 1.2%. Phoenix led the way with a 17% jump. After Phoenix, the biggest year-over-year gainers were Minneapolis, up 6.4%; Detroit, up 6.2%; and Denver, up 5.4%. Atlanta remained the laggard, down almost 10% year over year.

“All in all, we are more optimistic about housing,” says David Blitzer, chairman of the index committee at S&P/Dow Jones Indices.

The Case- Shiller report follows other recent good news about housing. Existing home sales were up 8% in August from July, single-family home starts were also up, and foreclosures are slowing.

Consumers are more optimistic, too. The Conference Board said Tuesday that its consumer confidence index this month reached its highest level since February.

Further home price increases are likely as long as the U.S. avoids recession, says Patrick Newport, IHS Global Insight economist.

He calls the recent home price gains a “game changer” for the economy and says they’ll help in “small and different ways.”

One effect of rising home prices is to help homeowners build equity. In the first half of this year, 1.3 million homeowners moved from being underwater — owing more on their mortgages than their homes were worth — into positive equity status, says market researcher CoreLogic.

Fewer underwater homes will lead to fewer defaults and enable more people to refinance and take advantage of interest rates near all-time lows. They averaged 3.55% for a 30year fixed-rate loan for the week ended Sept. 13, Freddie Mac says.

Increased refinancing will give more consumers more money to spend, Newport says. Higher home prices will give builders more room to raise prices. Higher prices may also boost home sales by enabling more owners to sell homes and move up to others, Newport adds.

Home price increases are likely to soften in the fall, as they typically do after the stronger spring and summer seasons, says Jed Kolko, economist for real estate website Trulia. But overall, Capital Economics expects home prices to rise 5% this year and a similar amount next year.

Prices are rising in part because distressed properties now are a smaller share of overall sales. The supply of homes for sale is also tighter — 6.1 months in August vs. 8.2 months a year earlier, says the National Association of Realtors.