Home Prices Still Weakening

By:
Peter King | March 29, 2011

Long-term U.S. home price trends continued to weaken in January, with many cities posting new post-crash lows, according to the latest Standard & Poor’s/Case-Shiller Home Price Indices.

U.S. home prices were down by an annual rate of 3.1 percent compared to January 2010, according to the index of 20 major U.S. metropolitan areas, released today. That’s a bigger rate of decline than the 2.4 percent annual decline reported for January and marks the seventh consecutive month that annual home price changes have worsened.
 
The annual rate of change is generally considered a more reliable indicator of fundamental market trends than month-to-month price changes, which tend to be more volatile.
 
“These data confirm what we have seen with recent housing starts and sales reports,” said David Blitzer, chair of the Standard and Poor’s Index Committee. “The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery.”
 
A double-dip recession – a new post-crash low in housing prices – could be developing, Blitzer said, with prices in the 20-City Index now only 1.1 percent above their previous lows in April 2009.
 
“At this point we are not too far off, and that is what many analysts are seeing with sales, starts and inventory data too,” he said.
 
Eleven of the 20 cities surveyed did register new post-crash lows in January, whereas only two cities – Washington D.C. and San Diego – showed annual price gains. Overall, average home prices have fallen back to the same level they were at in the summer of 2003.
 
Long-term price trends continue to feel the effect of the temporary homebuyer tax credit, which boosted sales activity in 2009 and early 2010. Annual rates of change in home prices showed steady improvement under the credit, topping out at a 4.2 percent annual gain in June 2010, the last month for closing sales under the credit. Since then, annual price changes have steadily worsened each month.
 
On a month-to-month basis, prices were down by 1.0 percent in January, following an identical decline in December. The picture looks somewhat better on a seasonally adjusted basis, however, with only a 0.2 percent decline in January, and with seven of the 20 cities actually posting monthly gains.
 
One positive sign for the market was reported on Monday, when the National Association of Realtors reported that February saw a modest gain in pending home sales, suggesting a rise in actual sales may be seen in March or April’s figures. However, that came on the heels a report of a sharp drop in actual sales during the month and a Census Bureau report that new home sales plunged to a 50-year low in February as well.

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