Home Prices Tread Water in August

Updated with a report from the Federal Housing Finance Agency.

NEW YORK ( TheStreet) -- Home prices across the U.S. edged up marginally in August.

The S&P/Case-Shiller index of national home prices in 20 U.S. cities ticked up 0.2% in August after a 0.9% decline in July. Prices dropped 3.8% in the 20-city index compared to levels a year earlier. The decline was more than the forecasted 3.5% drop, according to ThomsonONE Analytics.

Half of the 20 cities pooled by the index saw an increase in home prices over the month of August, while 16 of the 20 cities saw prices improve on an annual basis.

The recent figures show a "modest glimmer of hope," said David Blitzer, chairman of S&P's index committee. Blitzer noted that monthly increases in prices during the spring and summer had to be taken with a grain of salt, but that improvement in August numbers were "good news."

"The Midwest is one region that really stands out in terms of recent relative strength. Chicago, Detroit and Minneapolis have all posted very sharp monthly increases going back to May," added Blitzer. "These markets were some of the weakest during the crisis."

Prices in Minneapolis dropped 8.5%, posting the lowest year-over-year return, even as they improved over the last three months. Detroit and Washington were the only two cities where prices climbed on a year-over-year basis.

"With activity data weak and mortgage applications still at 1997 levels it is not surprising that prices are essentially treading water right now," writes David Semmens, economist with Standard Research, in a morning note.

Builders continue to face challenges like access to construction credit and competitions against cheaper foreclosed properties. The housing sector remains distressed as it bounces along the bottom.

The Commerce Department recently showed that home building surged in September. However, the gains were mainly due to an increase in multifamily homes as more Americans seek to rent instead of buy. Given that the market has not seen significant improvement two years after the recession ended in 2009, a turnaround remains far from realization.

The S&P/Case-Shiller 20-city index is a moving three-month average, so data for August was swayed by data from June and July. The index, which takes into all types of houses sold in metropolitan areas, is considered the best measure of changes in home prices.

Another read from the Federal Housing Finance Agency showed that home prices edged down 0.1% in August, after economists predicted a 0.1% increase. Moreover, the prices in July were downwardly revised to flat after an originally reported 0.8% rise. The FHFA's index is calculated using the prices of houses with mortgages backed by Fannie Mae or Freddie Mac.

-- Written by Chao Deng in New York.

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