For the first time since July of last year, the Case-Shiller 20-City Index rose 0.7 percent in April. Thirteen of the 20 cities showed increases in April, with several cities such as Atlanta, Seattle and Washington D.C. showing large price jumps. Atlanta and Seattle experienced price increases of 1.6 percent, while Washington, D.C., saw prices rise 3.0 percent.

The Atlanta market had price increases in all three tiers, but the bottom tier showed by far the biggest jump with an 8.6 percent gain. The Seattle market was driven by a 1.7 percent price rise for houses in the upper tier, which may be explained by the lowering of the loan limit for Fannie Mae and Freddie Mac. In Washington, D.C.,  prices are rising sharply all across the board, with the biggest rise being a 3.7 percent jump in the bottom tier. This segment of the market has risen at an 18.4 percent annual rate over the last three months. This is the sort of price rise that was seen in the bubble and may reflect some irrational exuberance about the D.C. market. It will not be sustained.

Many analysts seem to have missed the fact that the plunge in house prices has sharply reduced homeowners’ equity. According to data from the Federal Reserve Board, the ratio of homeowners’ equity to value at the end of the first quarter was just 38.0 percent at the end of the first quarter, the lowest on record. This massive loss in household wealth explains weaker consumption, not consumer pessimism.

For more, read the latest Housing Market Monitor.

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