U.S. home prices post decline
A key gauge of home values in the nation's largest cities fell in December to its lowest level since the start of the housing crisis in mid-2006.
Although a bottom in home prices doesn’t appear imminent, several economists pointed to small improvements in the housing market -- including upticks in sales and new construction -- that could support a recovery.
Home values in big U.S. cities have fallen to their lowest levels since the start of the housing bust, but cheap prices could draw in new buyers and bolster the chances of recovery, economists say.
A key gauge of home values in the nation's largest cities fell in December to its lowest level since the start of the housing crisis in mid-2006 — the latest evidence that real estate prices remain in a funk.
The Standard & Poor's/Case-Shiller index of 20 American cities, released Tuesday, fell 1.1% in December from November and 4% from December 2010. Eighteen out of the 20 cities tracked by the index posted declines while Atlanta, Las Vegas, Seattle and Tampa, Fla., saw average home prices hit new lows.
Although a bottom in prices doesn't appear imminent, several economists pointed to small improvements in the housing market — including upticks in sales and new construction — that will start to support a recovery.
In addition, they say, values aren't in a free fall similar to the one that emerged after the subprime mortgage crisis and credit crunch of 2007. The drop in prices is largely because of foreclosures, economists said, which continue to ravage certain hard-hit neighborhoods while places with fewer distressed sales improve.
"If you are not in a neighborhood where foreclosures are a big problem, it's very likely that home prices are not dropping," said Patrick Newport, U.S. economist for IHS Global Insight. "They are stabilizing or rising."
Celia Chen, a housing economist at Moody's Analytics, drew the distinction between a recovery in home sales and new construction, which appears to have begun, and an improvement in prices, which remains elusive and will probably continue to remain so through much of the year.
"Enough homes are in the foreclosure pipeline to keep house prices falling through much of this year," Chen said.
There are other indicators that may support a housing recovery, including increased household growth, record-high affordability, a tighter supply of homes on the market, low interest rates, a pickup in sales of previously owned homes and an increase in the number new units started by builders.
Housing remains road-blocked by persistent unemployment, the sheer number of foreclosures, the difficulties buyers are having securing mortgages and the large share of homes underwater, in which the owners owe more than the homes are worth.
"In terms of prices, the housing market ended 2011 on a very disappointing note," said David M. Blitzer, chairman of the index committee at S&P Indices. "While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended."
All the California cities in the index posted declines from the previous month. Los Angeles, San Diego and San Francisco fell 1.1%, 0.7% and 0.8%, respectively. Only two metro areas posted monthly gains: Miami, up 0.2%, and Phoenix, up 0.8%.
A separate, national index published quarterly by S&P Case Shiller fell 3.8% during the fourth quarter of 2011 and was down 4% compared with the fourth quarter of 2010.
Investors shrugged off the news of a new housing-price low and pushed U.S. stocks higher. The Dow Jones industrial average extended its recent gains to close past the 13,000 mark for the first time in four years.
"Although the rate at which house prices are falling accelerated at the end of last year, it may only be a few more months before the decline seen over the last five years comes to an end," said Paul Dales, senior U.S. economist at Capital Economics. "We expect prices will be broadly unchanged this year and maybe next."
The severity and length of the housing depression — now more than five years in the offing — has surprised forecasters. Warren Buffett, the billionaire investor, said over the weekend that he had been "dead wrong" predicting that a recovery in housing would have begun by now.
But even the biggest pessimists have softened their outlooks. Robert Shiller, a professor at Yale University and co-creator of the index who raised eyebrows last year with comments that home prices could experience severe declines, said Tuesday that his outlook had grown slightly more optimistic.
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