Home tax credit fuels prices in second quarter

Federal home buyer tax credits continued to prop up sales prices in the second quarter. But now that those credits have expired, economists worry price declines will come soon.

The 20 cities tracked by the Standard & Poor's/Case-Shiller home price index showed rising prices in June. It was the third straight month of increases, as buyers continued to close deals that are eligible for the credits, according to the report released Tuesday.

Buyers claiming the credit must close by the end of September, and the majority of them already have.

Home prices nationally were up 4.4 percent in the April-to-June quarter. That followed a decline of 2.8 percent in the January-to-March quarter. The jump was largely because buyers could take advantage of government tax credits of up to $8,000.

In the Tampa-St. Petersburg-Clearwater metro area, prices rose 0.2 percent in the second quarter, compared to the first quarter. Prices dropped 1.6 percent, compared to the same quarter a year ago.

Home sales have dropped sharply since incentives expired. Lending standards remain tight, unemployment is stuck near double digits and foreclosures are expected to remain at extraordinary levels.

"We do not take this report as a signal of future strength," wrote BNP Paribas economist Yelena Shulyatyeva. She expects the Case-Shiller report to show price declines by August. Economists at IHS Global Insight project home prices will fall by up to 8 percent and hit the bottom sometime next year.

The biggest monthly increases in June were in Chicago, Detroit and Minneapolis. Prices rose 2.5 percent in each of those cities. Prices in Seattle and Phoenix were flat. Home prices in Las Vegas fell 0.6 percent.

Prices are widely expected to fall in the second half of the year. Sales of previously occupied homes plunged in July to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.

Tampa-St. Petersburg-Clearwater saw July sales plummet a whopping 19 percent from the same month last year, according to the Florida Realtors group.