Home Prices in U.S. Cities Rise Less Than Forecast

Home Prices in U.S. Cities Rise Less Than Forecast (Update3)

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By Shobhana Chandra

April 27 (Bloomberg) -- Home prices in 20 U.S. cities roseless than forecast in February from a year earlier, a sign ahousing recovery will take time to develop.

The S&P/Case-Shiller home-price index of property valuesin 20 cities increased 0.6 percent from February 2009, thefirst gain since December 2006, the group said today in NewYork. The median forecast of economists surveyed by BloombergNews projected a 1.3 percent advance.

Home prices in February were 30 percent below the peakreached in July 2006, indicating the industry that helpedtrigger the worst recession since the 1930s will take years torecover lost ground. A pickup in employment is needed to helpstem the damage from mounting foreclosures that are restrainingfurther gains in property values.

“The big plunge is over, but significant strength isunlikely,” said Jim O’Sullivan, chief economist at MF GlobalLtd. in New York. “There is still a huge excess of vacanthouses.”

Confidence among U.S. consumers increased in April to thehighest level since September 2008 as Americans became moreupbeat about jobs, another report today showed. The ConferenceBoard’s index rose more than forecast, to 57.9 from 52.3 inMarch, according to the New York-based private research group.

Stocks trimmed losses following the consumer confidencereport. The Standard & Poor’s 500 Index fell 0.3 percent to1,208.35 at 10:12 a.m. in New York after dropping as much as0.6 percent on growing concern over Greece’s debt crisis.

Consumer Confidence

The home-price index was forecast to rise after a year-over-year drop of 0.7 percent for January, according to themedian forecast of 23 economists surveyed. Estimates rangedfrom a decline of 0.8 percent to a gain of 1.6 percent. Year-over-year records began in 2001.

The gauge fell 0.1 percent from the prior month afteradjusting for seasonal variations following a January increaseof 0.3 percent. Unadjusted, prices dropped 0.9 percent inFebruary from the prior month.

“These data point to a risk that home prices coulddecline further before experiencing any sustained gains,”David Blitzer, chairman of the index committee at S&P, said ina statement. “It is too early to say that the housing marketis recovering.”

Conflicting Signals

The seasonally adjusted and unadjusted series “have givenconflicting signals” recently, with the former rising whilethe latter fell, the group that issues the report said in anApril 20 statement. The turmoil in housing in the past fewyears has influenced the models used in adjusting the data,“resulting in larger seasonal adjustments and misleadingresults,” according to the group.

The year-over-year gauges therefore provide betterindications of trends in prices, the group said. The panelincludes Karl Case and Robert Shiller, the economists whocreated the index.

Eleven of the 20 cities in the S&P/Case-Shiller indexshowed a year-over-year decline, led by a 15 percent drop inLas Vegas and a 6 percent decrease in Tampa. San Franciscoshowed the biggest year-over-year increase, with prices rising12 percent.

Compared with the prior month, 19 of the 20 areas coveredshowed a decrease on an unadjusted basis, led by Portland,Oregon, and Minneapolis. San Diego showed the only monthlyincrease.

Tax Credit

Prices may improve in coming months as homebuyers rush totake advantage of a government tax credit worth as much as$8,000 before it expires. Purchase contracts must be signed bythe end of this week and transactions need to close by the endof June for buyers to be eligible.

Growing demand may help offset the pressure on prices frommounting foreclosures. Filings jumped 16 percent in the firstquarter from a year earlier, and bank seizures reached arecord, according to Irvine, California-based RealtyTrac Inc.Foreclosures push up the number of homes on the market, forcingbuilders and sellers to make concessions to get deals done.

Some businesses see better prospects. M.D.C. HoldingsInc., the Denver-based builder of Richmond America Homes, saidits loss narrowed in the first quarter from a year earlier asorders jumped 38 percent.

“While this trend is encouraging, we remain cautious dueto the impending expiration of the federal homebuyer tax creditand depressed overall economic conditions,” Chief ExecutiveOfficer Larry Mizel said in an April 23 statement.

Shiller, chief economist at MacroMarkets LLC and aprofessor at Yale University, and Case, a former economicsprofessor at Wellesley College, created the home-price indexbased on research from the 1980s.

The following table shows the change in the U.S. compositehome price index from S&P/Case-Shiller.

==========================================================================
                   Feb.    Jan.    Dec.    Nov.    Oct.    Sept.   Aug.
                   2010    2010    2009    2009    2009    2009    2009
==========================================================================
                   -------------- US Composite-20 City Index -------------
Monthly NSA %      -0.85%  -0.42%  -0.25%  -0.24%  -0.10%   0.38%   1.25%
3-Mth Annualized   -5.91%  -3.55%  -2.30%   0.16%   6.29%  14.07%  18.93%
Yearly %            0.64%  -0.73%  -3.10%  -5.35%  -7.27%  -9.22% -11.21%
Index Level        144.03  145.27  145.88  146.24  146.59  146.73  146.18
                   -------------- US Composite-10 City Index -------------
Monthly NSA %      -0.64%  -0.20%  -0.18%  -0.25%  -0.06%   0.47%   1.37%
3-Mth Annualized   -3.98%  -2.45%  -1.92%   0.66%   7.35%  15.28%  19.76%
Yearly %            1.43%  -0.08%  -2.44%  -4.54%  -6.40%  -8.33% -10.50%
Index Level        156.82  157.83  158.14  158.42  158.81  158.91  158.16
==========================================================================

==============================================================
                  Current Previous 3-Mth   YoY%    Index
                   MoM%    MoM%   Annual% Change   Level
==============================================================
US Composite-20    -0.85%  -0.42%  -5.91%   0.64%  144.03
--------------------------------------------------------------
San Francisco      -0.71%  -0.56%  -5.62%  11.90%  134.67
San Diego           0.62%   0.42%   4.85%   7.55%  157.92
Los Angeles        -0.67%   0.93%   5.04%   5.30%  171.82
Washington DC      -0.52%  -0.78%  -5.89%   5.02%  176.49
Denver             -0.84%  -1.27% -11.19%   3.59%  124.54
Cleveland          -2.13%  -0.69% -13.81%   3.24%  100.93
Minneapolis        -2.15%  -0.88% -13.37%   2.99%  119.91
Dallas             -1.76%  -1.30% -14.83%   2.65%  115.24
Boston             -1.04%  -0.49%  -6.44%   1.79%  151.44
Atlanta            -1.29%  -1.45% -12.64%  -0.93%  105.66
Phoenix            -1.48%  -0.64%  -6.45%  -1.64%  110.11
Charlotte          -0.99%  -0.46%  -8.39%  -2.48%  116.09
Chicago            -2.03%  -1.69% -19.40%  -3.01%  122.57
New York           -0.44%  -0.33%  -5.70%  -4.15%  170.46
Miami              -0.54%  -0.23%  -4.12%  -4.35%  147.52
==============================================================
                  Current Previous 3-Mth   YoY%    Index
                   MoM%    MoM%   Annual% Change   Level
==============================================================
Portland           -2.44%  -1.77% -16.64%  -4.77%  143.69
Detroit            -1.84%  -1.06% -11.03%  -5.38%   70.50
Seattle            -1.05%  -1.66% -12.80%  -5.63%  143.56
Tampa              -1.19%  -0.48%  -8.64%  -6.05%  136.54
Las Vegas          -0.40%  -0.54%  -3.11% -14.62%  103.40
==============================================================

To contact the reporter on this story:Shobhana Chandra in Washington at [e-mail]