PREVIEW-US home prices to eke out small June gain

* What: Standard & Poor’s/Case-Shiller Home Price Indexes

* When: Tuesday, Aug. 31 at 9 a.m. ET (1400 GMT)

* Economists’ median forecasts for 20-city index:

+0.2 pct seasonally adjusted June

+3.9 pct year-over-year in June


U.S. home prices likely eked out a small gain in June, but a rise would represent the final tail-winds of the homebuyer tax credit that ended in April rather than housing market improvement, economists said.

Sales have failed to sustain traction in the wake of the federal incentive that drew summer sales forward into spring months.

Tepid home buying despite record low mortgage rates, combined with the high hurdle of foreclosure sales, will keep weighing on home prices.

The Standard & Poor’s/Case-Shiller 20-city composite home price index likely rose 0.2 percent in June after a 0.5 percent increase in May, seasonally adjusted, according to a Reuters survey of 18 economists.

Forecasts ranged from a 0.6 percent drop to a 0.5 percent rise.

On an annual basis, the 3.9 percent increase that is expected for June would be a slowing from the 4.6 percent May rise, based on a survey of 29 economists. Estimates spanned between gains of 2.5 percent and 4.9 percent.

S&P, which publishes the indexes, will also report on unadjusted prices in June as well as national home prices for the second quarter. On an unadjusted basis, prices rose 1.3 percent in May and fell 1.3 percent in the first quarter.


If prices are flat or higher in June, based on the S&P/Case-Shiller series, it would likely be because the indexes are based on three-month moving averages and may be slower to adjust, several Wall Street firms noted.

HSBC forecasts a 0.7 percent rise in the national index for the second quarter, seasonally adjusted, after a 1.3 percent drop in the first quarter.

“Measures of U.S. house prices could be set to soften as the data begin to capture more of the transactions that occurred after the homebuyer tax credit expired at the end of April,” HSBC wrote in its weekly Economic Diary.

Bank of America-Merrill Lynch forecasts a 0.5 percent seasonally adjusted drop in the 20-city monthly index, predicting that “decline in June will prove to be the beginning of a downward trend in home prices.”


There is little illusion that home prices can accelerate much in the near term.

July sales of existing homes sank to the slowest pace in 15 years and new home sales dropped to the slowest pace on record, the latest evidence that tight lending and the loss of home equity have stifled buying and mobility.

Unemployment and foreclosures help make housing a ship that will be painfully slow to turn around.

Market reaction will likely be tempered by any surprisingly large home price rise, as the consensus is that price appreciation will be fleeting at least through this year. Unexpected weakness in June or second quarter home prices could prop bond prices, fostering the drive toward safe assets.