US home prices rise. Is it time to buy?

David Zalubowski/AP/File
This single-family home on Queen Anne Hill in Seattle was up for sale in June. Seattle was one of the few cities in a 20-city index that posted a decline in real estate prices in May, according to data released Tuesday.

It's been asked so often in the past year (like here, here, here, and here), it's become a cliché: Is it finally time to buy a house?

Now, maybe, the answer is yes.

Average home prices in the United States are now stabilizing after more than two years of decline, which means buyers can lock in a good deal before prices rise significantly. Last week, the Federal Housing Finance Agency reported that prices increased 1 percent between April and May. On Tuesday, the more widely watched S&P/Case-Shiller index confirmed it, posting the first rise (.pdf) in its 20-city survey in 34 months.

Mortgage rates are low. Housing affordability (.pdf) is near record levels. And sentiment among housing experts is turning more bullish.

"If you're looking at the national average, I really do expect that we will see an increase in the Case-Shiller index going forward," says Stan Longhofer, director of the Center for Real Estate at Wichita State University, in an interview.

"We're getting darn near the time when you can start looking for bargains and distress sales," wrote Steve Sjuggerud in his Daily Wealth blog earlier this month. "Over the next 12 to 18 months, you could end up with the deal of a lifetime."

There are still some doubters.

"I think people are still too bullish," opined the Living Off Dividends & Passive Income blog in June. "If you can afford to pay cash or can find a really cheap house or even a manufactured house that rents for twice the mortgage payment, it would probably make a good investment. But on the whole, I would wait."

And there are some real bears on residential real estate.

The timing also depends on where you live. Some metro areas, like Charlotte, N.C., and Denver, missed much of the housing bubble and are now rising smartly, according to the Case-Shiller index. Dallas, for example, rose 2 percent from April to May and has been on the upswing since February.

Other areas have declined for so long they were due for a bounce. Cleveland housing values jumped a whopping 4 percent between April and May. Even Detroit, whose home prices have been sliding for more than three years, eked out a gain.

Still other areas have avoided the worst of the economic slump, like Boston and San Francisco, and are now seeing housing prices rise.

All those markets seem steadier than those of the the housing-bubble cities, which are still declining, according to the Case-Shiller index. Las Vegas was down 2.5 percent in May; Miami and Phoenix were each down 1 percent.

These figures are not seasonally adjusted, so skeptics can point to spring and summer as being natural periods when more people are looking for homes. The seasonally adjusted Case-Shiller numbers show a minuscule 0.2 percent decline in May, the smallest decrease since February 2007.

In any case, it's not entirely clear how much seasonality affects home prices, Professor Longhofer says. "Demand picks up in the spring and summer. But so does the supply" of homes for sale.
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