As Housing Market Strengthens, Prices Rise at Lower End

The Standard & Poor’s Case-Shiller index for July showed an annual gain of 1.2 percent in the price of single-family homes across 20 cities. Prices rose 1.6 percent from June, the third month in a row that all 20 cities posted month-over-month gains.

However, in four cities, including New York, prices are still down from a year ago. In New York, prices increased 1.2 percent from June but fell 2.6 percent from July 2011. Atlanta, Chicago and Las Vegas also showed year-over-year declines.

Still, price increases showed up even in the cheapest homes.

Luxury homes never lost as much value as lower-end houses, and their prices have shown more strength in the nascent recovery. But now, the gap between price gains in the higher end of the market and the lower end has narrowed considerably, according to data from Zillow, a real estate Web site that divides homes into three price groups.

“It’s less that the top tier is cooling than that the bottom tier is strengthening,” said Stan Humphries, the chief economist at Zillow. “The bulk of the recovery is due to the changes in the bottom and middle tiers.”

Even in Las Vegas, lower-end homes ticked up in price, which may be good news for sellers but can be a hurdle for buyers. Mark Graham, a youth pastor who has been house-hunting for his family there for months, said buying a home for less than $150,000 can be a challenge.

“Houses are going on the market and within a day have multiple offers already on them,” Mr. Graham said, adding that most of the offers were from investors who don’t need financing. “It’s more or less a heartbreaking market, because you get your heart set on a house, and then someone walks in with cash.”

Not every market is showing improvement on the low end, according to Case-Shiller. Atlanta and Chicago were still lagging, but in places like Boston and San Diego, the bottom third of houses were performing much more strongly.

“The majority of the cities have been more like Boston and San Diego,” said Maureen Maitland, vice president of indexes for S.&P. Dow Jones Indices, which produces the Case-Shiller index.

In Phoenix, which has shown the strongest recovery in house prices of the 20 cities surveyed, the lowest third — homes under $127,000 — showed gains of 33.5 percent between July 2011 and July 2012, while the top tier (above $211,000) posted an 11.5 percent increase in the same period. The price cutoffs for the tiers vary by city.

Prices have been bolstered by a decline in the number of foreclosure sales and strong interest from investors, who are buying up low-priced properties and converting them to rentals.

In another optimistic economic sign, consumer confidence rose in September to its highest level since February, according to a report released Tuesday by the Conference Board, a private group.

  The consumer confidence index hit 70.3 points in September, well above economists’ expectations of 63 and a significant improvement from the upwardly revised level of 61.3 in August.