Home Prices in U.S. Probably Fell, Raising Risk of Extended Sales Decrease

Residential real estate prices probably dropped in January by the most in more than a year, raising the risk that home sales will keep slowing, economists said before a report today.

The S&P/Case-Shiller index of property values in 20 cities fell 3.2 percent from January 2010, the biggest 12-month decrease since November 2009, according to the median forecast of 29 economists surveyed by Bloomberg News. Another report may show consumer confidence declined in March as gasoline prices climbed.

Rising foreclosures are swelling the number of houses on the market, which may lower prices further in coming months. Falling home values, in turn, may keep potential buyers on the sidelines waiting for better deals, hurting construction and consumer spending as owners’ equity evaporates.

“The more home prices fall, the easier it is for people to wait to buy, and that can reinforce the downward cycle,” said Steven Blitz, a senior economist at ITG Investment Research, Inc. in New York. “The flip side is people still need to sell because you’ve got a lot of people who have stressed budgets.”

The S&P/Case-Shiller index, based on a three-month average, is due at 9 a.m. New York time. Survey estimates ranged from declines of 3.7 percent to 2.4 percent, after a 2.4 percent drop in December.

The New York-based Conference Board’s consumer confidence gauge, due at 10 a.m., fell to 65 from 70.4 in March, according to the survey median. Estimates ranged from 59 to 72.

Confidence Wanes

The projected drop compares with similar surveys in which consumers’ economic outlook dimmed. The Bloomberg Consumer Comfort Index last week dropped to the lowest level since August, and the Thomson Reuters/University of Michigan sentiment index fell to a 16-month low.

The Case-Shiller report may show home prices fell 0.4 percent in January from the prior month, the seventh straight decline, according to the Bloomberg survey.

The year-over-year gauges provide better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Unemployment at 8.9 percent indicates the number of distressed properties may increase, leading to more price declines as homeowners struggle to make mortgage payments. About 8.2 percent of loans outstanding were delinquent in the fourth quarter of 2010, according to Mortgage Bankers Association data.

Hurting Recovery

Bank of America Corp. Chief Executive Officer Brian T. Moynihan said the housing slump is the biggest challenge limiting the U.S. economic recovery.

“The problem of delinquent mortgages and falling home values is the most stubborn, entrenched and damaging economic problem our country faces today,” Moynihan said March 23 in Detroit, at a meeting of the city’s Economic Club.

Faced with declining home prices and the growing glut of unsold homes, residential real estate developers are reluctant to boost construction. Housing starts in the U.S. dropped more than forecast in February to the slowest pace since April 2009, and building permits slumped to a record low, the Commerce Department reported March 16.

Homebuilder shares have underperformed the broader stock market since the middle of last year. The Standard & Poor’s Supercomposite Homebuilder Index of 12 companies has declined 10 percent in the 12 months ended yesterday, compared with a 12 percent increase for the broader S&P 500 Index.

                        Bloomberg Survey

=====================================================
                         Case Shil Case Shil Consumer
                           Monthly  Monthly     Conf
                              MOM%     YOY%    Index
=====================================================

Date of Release              03/29    03/29    03/29
Observation Period            Jan.     Jan.    March
----------------------------------------------------
Median                       -0.4%    -3.2%     65.0
Average                      -0.5%    -3.2%     64.6
High Forecast                -0.1%    -2.4%     72.0
Low Forecast                 -0.9%    -3.7%     59.0
Number of Participants          18       29       68
Previous                     -0.4%    -2.4%     70.4
----------------------------------------------------
4CAST Ltd.                    ---     -3.3%     62.0
ABN Amro                     -0.4%     ---      65.0
Action Economics              ---      ---      62.0
Aletti Gestielle SGR          ---      ---      66.5
Ameriprise Financial          ---      ---      68.5
Banesto                       ---     -3.2%     64.8
Bank of Tokyo- Mitsubishi     ---      ---      65.4
Bantleon Bank AG              ---      ---      62.0
Barclays Capital             -0.4%    -3.2%     66.0
Bayerische Landesbank         ---      ---      65.0
BBVA                         -0.8%    -3.7%     64.0
BMO Capital Markets           ---     -2.4%     68.0
BofA Merrill Lynch            ---     -3.4%     62.0
Briefing.com                  ---     -3.5%     64.0
Capital Economics             ---      ---      65.0
Citi                          ---      ---      63.0
ClearView Economics          -0.5%     ---      68.0
Commerzbank AG                ---     -3.4%     65.0
Credit Agricole CIB           ---      ---      65.0
Credit Suisse                 ---      ---      70.0
DekaBank                      ---      ---      66.0
Desjardins Group              ---     -3.1%     64.6
Deutsche Bank Securities      ---      ---      62.0
Deutsche Postbank AG          ---      ---      62.0
Exane                         ---      ---      64.0
First Trust Advisors          ---      ---      59.8
Goldman, Sachs & Co.         -0.2%     ---      60.0
Helaba                        ---      ---      65.0
HSBC Markets                 -0.4%    -3.2%     62.5
Hugh Johnson Advisors         ---      ---      67.3
IDEAglobal                    ---     -3.2%     68.0
IHS Global Insight            ---      ---      60.0
Informa Global Markets        ---      ---      66.0
ING Financial Markets        -0.6%    -3.4%     66.0
Intesa-SanPaulo               ---      ---      65.0
ITG Investment Research       ---     -3.7%     ---
J.P. Morgan Chase            -0.3%    -3.2%     66.0
Janney Montgomery Scott      -0.7%    -3.3%     66.5
Jefferies & Co.               ---      ---      65.0
Landesbank Berlin             ---      ---      67.4
Landesbank BW                 ---     -2.9%     64.5
MF Global                    -0.4%    -3.3%     61.5
Mizuho Securities             ---     -3.3%     63.0
Moody’s Analytics             ---      ---      63.0
National Bank Financial       ---      ---      72.0
Natixis                       ---     -3.0%     67.0
Newedge                       ---      ---      65.0
Nomura Securities Intl.       ---     -3.2%     ---
Nord/LB                       ---      ---      64.5
Parthenon Group              -0.5%    -3.3%     66.4
Pierpont Securities           ---      ---      64.5
PineBridge Investments       -0.1%     ---      68.0
PNC Bank                      ---      ---      66.0
Raiffeisenbank International  ---      ---      63.0
Raymond James                 ---      ---      65.0
RBC Capital Markets           ---      ---      59.0
RBS Securities Inc.           ---      ---      64.0
Scotia Capital                ---     -3.0%     ---
Societe Generale              ---      ---      63.0
Standard Chartered           -0.9%    -3.1%     62.0
State Street Global Markets  -0.5%    -3.3%     64.1
Stone & McCarthy Research     ---      ---      64.0
TD Securities                -0.6%    -3.4%     65.0
UBS                          -0.7%    -3.6%     62.0
UniCredit Research            ---     -3.0%     64.0
Union Investment              ---      ---      66.0
University of Maryland       -0.2%    -3.2%     67.0
Wells Fargo & Co.             ---      ---      63.5
WestLB AG                     ---     -3.0%     65.0
Westpac Banking Co.           ---      ---      65.0
Wrightson ICAP               -0.4%     ---      62.0
====================================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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