WASHINGTON – Residential real estate prices dropped in February by the most in more than a year, a sign the U.S. housing market is struggling to stabilize.
The S&P/Case-Shiller index of property values in 20 cities fell 3.3 percent from February 2010, the biggest year-over-year decrease since November 2009, the group said on Tuesday in New York. The decline matched the median forecast in a Bloomberg News survey.
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Increases in foreclosures are adding to a growing inventory of unsold homes, which may further depress prices and dissuade potential buyers anticipating even cheaper dwellings. Declining property values also limit construction and restrain consumer spending as homeowners have less equity to borrow against.
“We’re essentially where we have been for the last year and a half or so, and that’s bouncing along the bottom with no discernable upward trend yet developing,” David Resler, chief economist at Nomura Securities International Inc. in New York, said before the report. “It’s about homebuyers getting enough confidence that when they buy, they’ll be buying into a market that has some value.”
Estimates for the price change ranged from declines of 2.5 percent to 4 percent, according to the forecasts of 26 economists in the Bloomberg survey.
Stock-index futures and Treasuries maintained gains after the report. The contract on the Standard & Poor’s 500 Index maturing in June increased 0.4 percent to 1,336.5 at 9:04 a.m. in New York. The yield on the benchmark 10-year note, which moves inversely to price, dropped to 3.35 percent from 3.37 percent late Monday.
Month to Month
Home prices fell 0.2 percent in February from the prior month after adjusting for seasonal variations. Unadjusted prices dropped 1.1 percent from the prior month after 19 of 20 cities showed declines. Detroit posted an unadjusted 1 percent gain in February from a month earlier.
The year-over-year gauge provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
The Case-Shiller measure is based on a three-month average, which means the February data was influenced by transactions in January and December.
All but one of the 20 cities in the index showed a year- over-year decline, led by an 8.4 percent slump in Phoenix and an 8.3 percent decrease in Minneapolis. Home prices in Washington were up 2.7 percent from a year ago. In February, prices in 10 markets dropped to fresh lows from their 2006, 2007 peaks. Those areas include Atlanta, Chicago, Las Vegas, Miami and New York.
Little Good News
“There is very little, if any, good news about housing,” David Blitzer, chairman of the Case-Shiller index committee at S&P, said in a statement. “The 20-city composite is within a hair’s breadth of a double-dip.”
The 20-city index fell in February to 139.27, compared with a recession low of 139.26, reached in April 2009.
Real estate markets for single-family homes “either were little changed from low levels or continued to weaken across all Districts,” in February and March, according to the Federal Reserve’s Beige Book. For homebuilders, “the spring building season is likely to be slower than previously anticipated,” the Fed said in its April 13 regional report.
The median price of existing homes, which make up more than 95 percent of the market, dropped 5.9 percent in March from a year earlier, according to the National Association of Realtors. New-home prices fell from a year earlier as well, a Commerce Department report showed on Monday.
Builder Sentiment
With unemployment close to 9 percent, home values declining and a swelling supply of unsold properties, confidence among U.S. homebuilders fell in April. The National Association of Home Builders/Wells Fargo sentiment index declined to 16 from 17 in March, the Washington-based group said last week. Readings below 50 mean more respondents said conditions were poor.
KB Home, the Los Angeles-based homebuilder that targets first-time buyers, this month reported a bigger-than-expected loss for the quarter ended Feb. 28 as orders plunged.
“Today’s consumers remain very cautious, whether they have concerns about home prices falling further, their job status, their ability to qualify for a loan, or general confidence in the economy,” President and Chief Executive Officer Jeffrey Mezger said during a conference call with analysts on April 5. “A sustained, broad-based housing recovery will not occur until we start to experience material job creation.”
