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December 30, 2009

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US home prices rise but rally uneven

UNITED States home prices rose for the fifth month in a row in October, but the recovery continues to be uneven with only 11 of the 20 metro areas tracked showing gains.

The Standard & Poor's/Case-Shiller home price index released yesterday edged up 0.4 percent to a seasonally adjusted reading of 145.36 in October from September. The index was off 7.3 percent from October last year, nearly matching expectations of economists surveyed by Thomson Reuters.

The index is now up 3.4 percent from its bottom in May, but still nearly 30 percent below its peak in April 2006.

San Francisco and Detroit posted the largest increases. Dallas had a flat reading for the month, while Tampa and Chicago fell the most.

"Coming after a series of solid gains, the data are likely to spark worries that home prices are about to take a second dip," David Blitzer, chairman of the index committee at S&P's, said in a statement. That happened in the early 1980s, he said, and the current housing recovery appears more solid.

The federal government has stepped in with an extraordinary level of support this year for the housing market. Home price gains since the summer reflect the rush of home buyers trying to close their deals before the original expiration date of a federal tax credit. The November 30 deadline was extended to April 30.

Besides a credit of up to US$8,000 for first-time buyers, Congress also included homeowners who have lived in their current properties for at least five years. They can now claim a tax credit of up to US$6,500 if they relocate.

The Federal Reserve is also buying up US$1.25 trillion in mortgage-backed securities to keep interest rates at historical lows.


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