Home Prices Decline Despite Tax Credit

By:: Kirk Haverkamp | May 25, 2010

Home prices fell in the first quarter of the year, despite tax incentives and continued low interest rates, suggesting renewed weakness in the housing market, according to figures released today by Standard & Poor’s/Case-Shiller.

The monthly survey of housing prices in select U.S. markets showed a 3.2 percent decline in the first quarter of the year, even though prices continued to show improvement over one year earlier. On an annual basis though, single family home prices were up 2.3 percent in March compared to one year earlier, based on S&P’s survey of 20 major housing markets.

“The housing market may be in better shape than this time last year; but, when you look at recent trends

there are signs of some renewed weakening in home prices,” said David Blitzer, chair of the Standard & Poor’s Index Committee. “In the past several months we have seen some relatively weak reports across many of the markets we cover.”

The current data shows a mixed picture of where the housing market is headed. Taking the long view, the survey has shown improvements in the annual rate of return for 12 consecutive months, with each month showing a stronger annual gain than the one before. However, month-to-month prices have actually declined for six consecutive months now, which has yet to show up in the annual data.

“It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices,” Blitzer said. “Now that the tax incentive ended on April 30th, we don’t expect to see a boost in relative demand.”

Single-family home prices bottomed out in the first quarter of 2009 following three years of steep declines, according to the S&P National Home Price Index, then rebounded by 6.5 percent in the second and third quarters of the year. However, since then prices have retreated by 4.2 percent over the fourth quarter of 2009 and first quarter of this year.

Thirteen of the 20 metropolitan areas surveyed showed price declines from February to March, with eight - Atlanta, Charlotte, Chicago, Detroit, Las Vegas, New York, Portland and Tampa – posting their lowest price indexes in the 22 years of the survey. At the same time, some of the hardest-hit markets continue to improve from their low points, with San Diego posting 11 consecutive monthly gains and, San Francisco and Cleveland also showing improvement in March, along with annual gains as well.

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