Home Prices Still Pressured By Sudeep Reddy Wall Street Journal 04-28-2010

Home Prices Still Pressured
Foreclosures, High Inventories Weigh on Market; Consumer Confidence Rises
By Sudeep Reddy
The Wall Street Journal
April 28, 2010

Home prices nationwide slipped for the fifth straight month in February as many markets remained under pressure from foreclosures and high inventories.

Meanwhile, consumer confidence rose in April to its highest level since the financial crisis struck in September 2008.

The S&P/Case-Shiller index tracking home prices across 20 metropolitan areas fell 0.9% during the month from January, as all but one city—San Diego—posted declines. Compared with a year ago, however, prices rose nationwide for the first time since December 2006. Eleven out of 20 cities included in the index posted annual declines, underscoring the wide variation in housing conditions across markets.

After picking up last spring, home prices nationwide appear to be bouncing around without large swings, said David Blitzer, chairman of the Standard & Poor's Index Committee. "The good news is we don't seem to have a continuing housing bust," he said. "The bad news is we don't seem to have an incredible price recovery."

Home prices nationwide slipped for the fifth straight month in February as many markets remained under pressure from foreclosures and high inventories.

Meanwhile, consumer confidence rose in April to its highest level since the financial crisis struck in September 2008.

The S&P/Case-Shiller index tracking home prices across 20 metropolitan areas fell 0.9% during the month from January, as all but one city—San Diego—posted declines. Compared with a year ago, however, prices rose nationwide for the first time since December 2006. Eleven out of 20 cities included in the index posted annual declines, underscoring the wide variation in housing conditions across markets.

After picking up last spring, home prices nationwide appear to be bouncing around without large swings, said David Blitzer, chairman of the Standard & Poor's Index Committee. "The good news is we don't seem to have a continuing housing bust," he said. "The bad news is we don't seem to have an incredible price recovery."

Home prices nationwide slipped for the fifth straight month in February as many markets remained under pressure from foreclosures and high inventories.

Meanwhile, consumer confidence rose in April to its highest level since the financial crisis struck in September 2008.

The S&P/Case-Shiller index tracking home prices across 20 metropolitan areas fell 0.9% during the month from January, as all but one city—San Diego—posted declines. Compared with a year ago, however, prices rose nationwide for the first time since December 2006. Eleven out of 20 cities included in the index posted annual declines, underscoring the wide variation in housing conditions across markets.

After picking up last spring, home prices nationwide appear to be bouncing around without large swings, said David Blitzer, chairman of the Standard & Poor's Index Committee. "The good news is we don't seem to have a continuing housing bust," he said. "The bad news is we don't seem to have an incredible price recovery."

Sales from December to February tend to be the weakest of the year due to the weather, so analysts expect improvement in the data in coming months. A federal tax credit of up to $8,000, which applies to contracts signed by Friday that close by June 30, is drawing homebuyers into the market. That should limit any price drops during the spring months. The summer months also tend to be strong for home sales. But that could be offset by the tax credit's expiration, which is likely pulling sales ahead as homebuyers rush to meet the deadline.

Home prices face numerous risks in the months ahead that analysts say could push prices down by as much as 5%. Foreclosures continue to rise as homeowners walk away from properties that have lost value. At the same time, high unemployment is leading more households into default as they miss mortgage payments. That's pushing inventories up just as key government support—to draw buyers and lower mortgage rates—expires.

According to the Case-Shiller data, average U.S. home prices in February were near their levels of the second half of 2003. The 20-city index was down 30.3% from its mid-2006 peak to February.

The 20-city index rose 0.6% from a year earlier. San Francisco posted the strongest gain, at 11.9%, followed by San Diego at 7.6% and Los Angeles at 5.3%. At the other end, states hit hard by the housing downturn—such as Florida and Nevada—posted sharp declines. Las Vegas fell 14.6%, followed by 6% in Tampa.

Nineteen of 20 metro areas declined in February from a month earlier, while 14 have now fallen for at least four straight months. Twelve areas dropped at least 1% on a monthly basis. Six cities—Charlotte, Las Vegas, New York, Portland, Seattle and Tampa—showed prices dropping to their lowest point since home prices peaked three to four years ago in those areas. "These data point to a risk that home prices could decline further before experiencing any sustained gains," said Mr. Blitzer of S&P.

Meanwhile, the Conference Board's consumer-confidence index rose to 57.9 in April from 52.3 a month earlier, marking its highest point since the financial crisis hit in September 2008. Consumers' current assessment of the economy improved, while their expectations for the months ahead rose markedly. The stronger consumer sentiment appeared to be driven by recent improvement in the labor market.

A separate gauge of consumer sentiment from the University of Michigan remains weak, leading some economists to cast doubt on the latest improvement. The Conference Board's latest gauge "leaves confidence only at the high end of the uninspiring range it has occupied since the end of last year," ING economist Rob Carnell said in a note to clients. "And it is still not consistent with consumer spending growth significantly in excess of 2%."