Home Prices in 20 U.S. Cities Fall 2.4% From Year Earlier

Residential real-estate prices dropped in the 12 months to December by the most in a year, a sign the U.S. housing market is struggling even as the rest of the economy recovers.

The S&P/Case-Shiller index of home values in 20 cities fell 2.4 percent, the biggest year-over-year decrease since December 2009, the group said today in New York. The median forecast of economists surveyed by Bloomberg News projected a 2.3 percent decrease.

A predicted increase in foreclosures this year as banks resume seizures may depress home values further, prompting would-be buyers to hold off on purchases. Unemployment at 9 percent and declines in housing are among reasons the Federal Reserve has signaled it will proceed with its unconventional monetary stimulus.

Home prices are still declining amid excess supply,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York. “Although transactions have started to pickup, buyers are looking for very low prices. There is a backlog of distressed properties and it will flow into the market this year. We expect to see a gradual drop in prices.”

Confidence among U.S. consumers rose in February to the highest level in three years as more Americans believed their incomes and the economy will grow, a report today from the Conference Board also showed. The New York-based research group’s sentiment index increased to 70.4, the highest level since February 2008, from 64.8 the prior month.

Bloomberg Index

The Conference Board’s measure contrasts with the Bloomberg Consumer Comfort Index, which held near a two-month low last week. The Bloomberg gauge, formerly the ABC News U.S. Weekly Consumer Comfort Index, was minus 43.4 compared with minus 46 the prior week.

The measure often mirrors changes in prices Americans pay at the gas pump, whereas changes in the labor market have more of an influence on the Conference Board’s confidence index.

Stocks dropped on concern over rising unrest in North Africa and the Middle East. The Standard & Poor’s 500 Index fell 1 percent to 1,329.4 at 11:15 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 3.48 percent from 3.59 percent late yesterday.

The median forecast was based on a survey of 23 economists surveyed. Estimates ranged from declines of 3.1 percent to 1.7 percent.

Fourth Quarter

Nationally, prices decreased 4.1 percent in the fourth quarter from the same time in 2009 and were down 3.9 percent from the previous three months, the biggest quarter-to-quarter drop in almost two years. At 130.38, the index was just shy of the recession low of 129.2 reached in the first quarter of 2009.

Home prices in the top 20 cities fell 0.4 percent in December from the prior month after adjusting for seasonal variations, following a 0.6 percent November decrease. Unadjusted prices fell 1 percent from the prior month as 19 of the 20 cities showed declines.

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 gauge is based on a three-month average, which means the December data were influenced by transactions in November and October.

Eighteen Cities

Eighteen of the 20 cities in the index showed a year-over- year decline, led by a 9.1 percent drop in Detroit.

“We ended 2010 with a weak report,” David Blitzer, chairman of the index committee at S&P, said in a statement. “Despite improvements in the overall economy, housing continues to drift lower and weaker.”

Washington showed the biggest year-over-year increase, with prices rising 4.1 percent in the 12 months to December.

Fed policy makers described the real estate market as “depressed” in a Jan. 26 statement following their policy meeting in Washington. The central bankers said falling home values continued to stymie the consumer spending that accounts for about 70 percent of the world’s largest economy.

The share of U.S. mortgages in the foreclosure process at the end of 2010 matched an all-time high, the Mortgage Bankers Association said last week, as lenders and servicers delayed home seizures to investigate charges of improper documentation.

Worth Less

At the end of last year about 15.7 million mortgaged single-family homes, or 27 percent, were worth less than the amount of loans outstanding, according to Zillow Inc., a Seattle-based real estate information company. It was the highest share in data going back to the first quarter of 2009.

Industry projections reinforce the concern about housing. The number of homes receiving a foreclosure notice will climb about 20 percent in 2011, reaching a peak for the housing crisis, said RealtyTrac Inc., an Irvine, California-based data seller.

“The issue is unemployment, fear and lack of confidence, and that’s what’s got to turn right now,” Ara Hovnanian, chief executive officer of New Jersey’s largest homebuilder, said Feb. 14 on Bloomberg Television’s “Surveillance Midday” with Tom Keene.

Hovnanian Enterprises Inc. on Dec. 22 reported a fourth- quarter loss bigger than analysts expected as revenue fell 19 percent. The company has cut about 75 percent of its workforce in the past four years, Hovnanian said during the interview. He said he expects the industry “to start building some momentum” in the second quarter.

                         Bloomberg Table

============================================================
               1-months 3-months  1-year  2-years  3-years
               earlier  earlier  earlier  earlier  earlier
============================================================
US Composite-20  -0.96%   -3.29%   -2.38%   -5.39%  -23.00%
------------------------------------------------------------
Washington DC     0.33%   -0.11%    4.13%    6.05%  -14.73%
Boston           -0.14%   -2.39%   -0.81%   -0.33%   -7.32%
Dallas           -0.24%   -2.43%   -3.56%   -0.72%   -5.11%
Cleveland        -0.39%   -3.90%   -3.98%   -5.21%  -10.99%
Miami            -0.49%   -1.74%   -3.73%  -13.27%  -38.24%
Charlotte        -0.66%   -2.44%   -4.41%   -7.99%  -14.64%
San Diego        -0.69%   -2.13%    1.71%    4.48%  -21.48%
Denver           -0.74%   -2.54%   -2.44%   -1.30%   -5.25%
Atlanta          -0.90%   -6.08%   -8.01%  -11.58%  -22.91%
============================================================
               1-months 3-months  1-year  2-years  3-years
               earlier  earlier  earlier  earlier  earlier
============================================================
New York         -0.90%   -3.77%   -2.32%   -8.50%  -16.94%
San Francisco    -1.04%   -4.02%   -0.40%    4.40%  -28.21%
Las Vegas        -1.10%   -1.68%   -4.69%  -24.29%  -49.26%
Portland         -1.21%   -4.21%   -7.82%  -12.79%  -24.25%
Los Angeles      -1.32%   -2.49%   -0.23%   -0.24%  -26.62%
Minneapolis      -1.33%   -5.31%   -5.30%   -7.28%  -24.81%
Chicago          -1.43%   -5.53%   -7.39%  -14.07%  -26.35%
Phoenix          -1.67%   -3.79%   -8.34%  -16.81%  -45.06%
Seattle          -2.03%   -4.39%   -5.99%  -13.42%  -24.98%
Detroit          -2.34%   -6.60%   -9.14%  -18.49%  -36.18%
Tampa            -2.57%   -4.59%   -6.21%  -16.53%  -34.93%
============================================================

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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

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