U.S. home prices made their first monthly climb in nearly three years, which may provide relief to the embattled housing sector after last year's price plunge sent the economy reeling.
A new home sits for sale in Lemont, Illinois, July 27, 2009. U.S. home prices made their first monthly climb in nearly three years, which may provide relief to the embattled housing sector after last year's price plunge sent the economy reeling.
But experts warn the uptick may be temporary and that continuing unemployment could curb a significant rise.
The Standard & Poor's Case-Shiller Home Price Index, which tracks home prices in 20 major cities, increased half a percent age point in May -- the latest available statistics -- from the previous month.
And that's not the only good news. The National Association of Realtors and the Federal Housing Finance Agency also point to an upward price trend. More affordable homes have stirred activity in the housing market. Sales climbed in June and foreclosure sales are down between 45 and 50 percent from earlier in the year, according to Goldman Sachs, an investment bank.
Experts said a more stable housing market would boost consumer confidence and help lessen bank losses due to foreclosures. But they also noted the sector may not be out of the woods yet, as much hinges on the labor market.
Indeed, foreclosures could climb until unemployment -- 9.5 percent as of June and possibly rising -- levels off.
Mark Calabria, director of financial regulation studies at the CATO Institute, a Washington, D.C. think tank, said people do not buy homes when they are unemployed.
Moreover, it remains unknown when unemployment will bottom out.
"Any increase in unemployment will have an adverse impact on the housing market," he said.
And a significant rise in new monthly unemployment claims -- around half a million or more -- could spark an uptick in foreclosures, he said.