September 1, 2010 (Jeff Alan)

Freddie Mac reported on August 30th that there was a slight increase in home prices in the 2nd quarter of 2010. The Conventional Mortgage Home Price Index (CMHPI) Purchase-Only Series for the United States registered a 3.1 percent (13.2 percent annualized) increase in the second quarter relative to the first quarter on a not-seasonally-adjusted basis. U.S. home values fell 0.2 percent relative to the second quarter a year ago.

Home values rose in all nine Census Divisions. This is the first time since the second quarter of 2009 that all Census Divisions have witnessed positive changes in home values.

Amy Crews Cutts, Freddie Mac deputy chief economist reported, “We saw increases in home values in the second quarter that were very strong across all regions – there is no doubt that some of this was due in part to the now-expired homebuyer tax credits which boosted sales activity as well as to the usual seasonal bump we see each Spring.

“Although the homebuyer tax credit programs have expired, 30-year fixed mortgage rates have decreased by more than half a percentage point since the end of April, setting multiple new record lows according to Freddie Mac’s Primary Mortgage Market Survey®. We will be watching carefully the home sales reports in August and September to see whether the July drop was the start of a new trend down or the result of a temporary pull-forward due to the tax-credit programs.”

Sales of homes has dropped each month since the end of the tax credit at the end of April with reported July sales being the worse in 15 years. With a nearly 10 month supply of homes on the market, and growing, many analysts believe that there may be a further softening in home prices.