House prices continued to improve in June. The release of the Standard & Poor’s Case-Shiller house price index (HPI) for the second quarter and June revealed an increase in both the quarterly and monthly indexes. The U.S. National Home Price Index (HPI) increased by 3.6% in the second quarter of 2011. The composite 20 (CS20) and composite 10 (CS10) HPIs continued to rise, both increasing 1.1% in June—the third consecutive monthly increase for both indexes. 

In June, house prices increased in 19 of the 20 cities covered by the index on a not seasonally adjusted basis and remained flat in the other (Portland). On a not seasonally adjusted basis, the largest gains were observed in Minneapolis (+3.2%), Chicago (+3.2%), Boston (+2.4%), Washington DC (+2.3%) and Detroit (+2.2%). Twelve cities have posted three consecutive months of positive month-over-month returns, with the greatest improvement over the three-month period observed in Minneapolis (+6.3%), Boston (+4.8%), Chicago (+4.6%), Denver (+4.5%) and Atlanta (+4.0%).

While no cities made new lows in June 2011 and the majority of cities are seeing improvement in their annual rates, the house price trend is not uniform across the metropolitan areas. According to Standard & Poor’s, “…. eight (cities) bottomed in 2009 and have remained above their lows. These include all of the California cities plus Dallas, Denver and Washington DC, all relatively strong markets. At the other extreme, those which set new lows in 2011 include the four Sunbelt cities—Las Vegas, Miami, Phoenix and Tampa.” Thus, prices tend to be regional; there has not been a consistent national trend house prices in recent years. 

The recent improvement in house prices in the second quarter is a positive sign for housing demand going forward. We do not expect any further declines in house prices over the remainder of 2011, and anticipate house prices will begin to show modest growth through 2012. This improving outlook for house prices should help to restore consumer confidence in housing and support a more definitive recovery in the housing demand.