"Home Prices in 20 U.S. Cities Fall More Than Forecast (Update2)
May 26 (Bloomberg) -- Home prices in 20 major metropolitan areas fell more than forecast in March as foreclosures surged, threatening to extend the housing slump.
The S&P/Case-Shiller home-price index decreased 18.7 percent from March 2008, matching the drop in the year ended in February. The measure declined 19 percent in January, the most since data began in 2001.
Record foreclosures are depressing the value of other properties, contributing to a slump in household wealth that is hurting consumer spending and the economy. Still, falling prices and mortgage rates have made homes more affordable, helping to stem the slide in sales, which will eventually help prices stabilize.
“The housing market still has somewhat of a ways to go before it completely bottoms,” Celia Chen, an economist at Moody’s Economy.com in West Chester, Pennsylvania, said in an interview on Bloomberg Television. “Prices I think still will fall a little bit further.”
The Standard & Poor’s 500 index rose 1.8 percent, to 903.03 as of 10:45 a.m. in New York. The yield on 10-year Treasuries was little changed at 3.46 percent from 3.45 percent yesterday.
Economists forecast the index would drop 18.3 percent from a year earlier, according to the median of 26 projections in a Bloomberg News survey. Estimates ranged from declines of 17.9 percent to 18.9 percent.
A separate report showed confidence among U.S. consumers jumped this month to the highest level since September, reflecting growing perceptions that the job market will improve. The Conference Board’s sentiment index surged to 54.9, higher than forecast and the biggest gain since April 2003, the New York-based research group said today.
Compared with a month earlier, home prices decreased 2.2 percent in March, also the same as in February, today’s Case- Shiller report showed.
The price figures aren’t adjusted for seasonal effects, so economists prefer to focus on year-over-year changes.
Today’s report also showed prices nationally fell 19.1 percent in the first quarter from the same period last year, the largest drop in the figure’s the 21-year history, and were down 7.5 percent from the last three months of 2008.
All 20 cities in the index showed a year-over-year price decrease in March, led by Phoenix, Las Vegas and San Francisco.
Compared with the prior month, prices fell in 17 cities, led by a 6.1 percent drop in Minneapolis that was the largest one-month drop ever recorded by any city. The 4.9 percent month- over-month drop in Detroit and the 2.5 percent decrease in New York also set records for those cities.
“We see no evidence that a recovery in home prices has begun,” David Blitzer, chairman of the index committee at S&P, said in a statement.
Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.
Foreclosure filings in the U.S. rose to a record for the second consecutive month in April, RealtyTrac Inc. said May 13. A total of 342,038 properties received a default or auction notice or were seized. One in 374 households got a filing, the highest monthly rate since the property data service began issuing such reports in 2005.
Job losses may cause some owners to miss mortgage payments, forcing even more houses into foreclosure, economists including IDEAglobal’s Maxwell Clarke said. The U.S. unemployment rate jumped in April to the highest level since 1983, according to Labor Department data.
Foreclosure-driven declines in prices have spurred resales. Economists forecast existing home sales rose to a 4.66 million rate in April, according to the survey. The National Association of Realtors’ report is due tomorrow.
About half of March home resales were of distressed properties and first-time buyers accounted for about 51 percent, the group said last month.
Falling real-estate values and stock prices have led to the biggest decrease in household net worth on record. The loss of wealth is prompting Americans to boost savings and limit spending, one reason economists forecast a recovery from the worst recession in at least half a century will be weak.
While the rise in foreclosures is likely to keep hurting prices, some companies are seeing signs demand is stabilizing.
Toll Brothers Inc. Chief Executive Officer Robert Toll said May 20 that deposits for the company’s new homes rose in the fiscal second quarter from a year earlier. That makes him “slightly more optimistic,” he said on a conference call.
Since the week ended March 22, per-community deposits exceeded those made last year in seven of the past nine weeks, Toll said. The average sale price fell to $563,000 in the second quarter from $575,000 in the previous three months.
About 40 percent of deposits in the quarter converted into signed contracts, compared with 65 percent in the company’s strongest years, Toll said.
Federal Reserve policy makers, at their April 28-29 Federal Open Market Committee meeting, saw “some signs pointing toward economic stabilization” and some officials detected prospects of “a trough” in the housing market’s downturn, according to minutes from the meeting released last week.