Home prices rise in May for the second straight month as tax credits attract more buyers

Home prices increase 1.3 pct. in May from April

NEW YORK — Home prices rose in May for the second straight month as federal tax incentives pulled more buyers into the market.

The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday posted a 1.3 percent increase in May from April.

Nineteen of 20 cities showed price gains month over month. Minneapolis and Atlanta led the way with 2.8 percent and 2 percent increases, respectively. And San Diego posted its 13th straight monthly gain.

Only Las Vegas recorded a price decline. The metro hit a new record low in May. Home prices there have lost 56.4 percent of their value since peaking in August 2006.

And while Detroit recorded a 0.7 percent increase from April, the average home price there is about same as it was in 1994.

Overall, the gains underscore the impact of the government’s homebuying tax credits. Buyers rushed to purchase before the credits expired at the end of April. The index is an average of home sales in March, April and May.

May is typically a strong month for selling homes. Most economists don’t expect the price gains to last through the year and many predict home prices will fall through the rest of the year.

“I bet in six months 15 to 20 cities will have falling prices,” said IHS Global Insight economist Patrick Newport. He predicts prices will fall another 6 percent to 8 percent before turning around next year.

Nationally, prices have risen 5.1 percent from their April 2009 bottom. But they remain 29 percent below their July 2006 peak.

More recent housing figures show a gloomier outlook, even though mortgage rates are at the lowest level in decades.

Sales of previously occupied homes fell 5.1 percent in June. New home sales jumped last month, but it was the second-weakest month on record and it came after sales tumbled in May.

A high number of foreclosures has forced home prices down in many areas, while 9.5 percent unemployment and tight credit have kept many from buying.

American sentiment eroded further in July, the Conference Board said Tuesday. Its Consumer Confidence Index slipped to 50.4 in July, down from the revised 54.3 in June. It was the second straight monthly decline.

A reading above 90 indicates an economy on solid footing.

“Until we see significant gains in employment, I just don’t think you’re going to see strong demand,” said Glenn Kelman, chief executive of Redfin, an online real estate brokerage based in Seattle.

AP Real Estate Writer Alan Zibel in Washington contributed to this report.