Home Prices in 20 U.S. Cities Fell by a Record 19% in January

Posted By on April 2, 2009

Things continue to fall apart…………Home Prices in 20 U.S. Cities Fell by a Record 19% in January ……… The S&P/Case-Shiller index‘s decrease was more than forecast and compares with an 18.6 percent decrease in December. The gauge has fallen every month since January 2007, and year- over-year records began in 2001.   Downward Path….All 20 cities in the index showed a year-over-year price decrease in January, led by a 35 percent drop in Phoenix and 32.5 percent drop in Las Vegas.   All of the 20 areas covered also showed declining home prices from the prior month. There are very few bright spots that one can see in the data, David Blitzer, chairman of the index committee at S&P, said in a statement.  Most of the nation appears to remain on a downward path.

-John Schultz

By Shobhana Chandra

March 31 (Bloomberg) —

Home Prices in 20 U.S. Cities Fell by a Record 19% in January 

The S&P/Case-Shiller index’s decrease was more than forecast and compares with an 18.6 percent decrease in December. The gauge has fallen every month since January 2007, and year- over-year records began in 2001.

A glut of unsold properties may keep prices low, shrinking household wealth and damping spending. Still, sales of new and previously-owned homes rose in February, indicating the housing slump, now in its fourth year, may ease as policy efforts to unclog credit and aid borrowers begin to take hold.

“Arresting the slide in home prices will be key to ending the recession,” John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said before the report. Other recent data though, he said, indicate “the housing slump may be nearing a bottom.”

The home price index was projected to decline 18.6 percent from a year earlier, according to the median forecast of 29 economists in a Bloomberg News survey, after an originally reported drop of 18.5 percent in December. Estimates ranged from declines of 17.2 percent to 19 percent.

From a month earlier, home prices fell 2.8 percent in January, after a 2.6 percent drop in December, the report showed. The figures aren’t adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of month-to-month.

‘Downward Path’

All 20 cities in the index showed a year-over-year price decrease in January, led by a 35 percent drop in Phoenix and 32.5 percent drop in Las Vegas.

All of the 20 areas covered also showed declining home prices from the prior month.

“There are very few bright spots that one can see in the data,” David Blitzer, chairman of the index committee at S&P, said in a statement. “Most of the nation appears to remain on a downward path.”

Foreclosures surged 29.9 percent in February from a year earlier after rising 17.8 percent in January, according to RealtyTrac Inc. An estimated one in every 440 homes is in some stage of foreclosure.

Still, recent reports showed builders broke ground on 22 percent more homes in February than the prior month — when starts plunged to a record low — and that sales of new and previously owned houses increased, signaling the industry’s decline may be closer to reaching a bottom.

Mortgage Rates

Lower prices and borrowing costs are attracting some buyers. The National Association of Realtors’ affordability index increased to a record in February. Mortgage rates for 30- year fixed loans fell to a record low in the week ended March 20, according to the Mortgage Bankers Association.

KB Home, a Los Angeles-based homebuilder that caters to first-time buyers, last week reported a narrower loss in the quarter ended Feb. 28, and said net new-home orders rose 26 percent from a year earlier, the first gain since the fourth quarter of 2005.

Also, while job losses are hurting Americans’ confidence, retail sales fell less than forecast in February and consumer spending had a second straight monthly gain. Economists predict the recession may ease in the second half of this year after the economy shrank 6.3 percent last quarter, the most since 1982.

Federal Reserve officials last week voiced confidence the economy will show signs of recovery by year-end, responding to unprecedented monetary stimulus and the Obama administration’s $787 billion fiscal package.

“Resumption of growth should not be too far off,” Minneapolis Fed President Gary Stern said in a speech on March 26. He added, “Once under way, the pace of expansion is likely to be subdued for some time.”

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.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: March 31, 2009 09:01 EDT

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