U.S. Home Prices in December Probably Had Biggest 12-Month Drop in a Year

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, economists said before a report today.

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, according to the median forecast of 19 economists surveyed by Bloomberg News. Another report may show consumer confidence fell this month from the highest level in almost three years.

Foreclosures are forecast to rise this year as banks resume seizures, further depressing values and 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.

“We’re seeing declines in home prices and they are broad- based,” said Julia Coronado, chief North America economist at BNP Paribas in New York. “We’re seeing very weak demand for housing, lots of distressed supply coming on the market. There is every reason to expect downward pressure for a while.”

S&P/Case-Shiller’s report is due at 9 a.m. New York time. Forecasts for the 12-month change ranged from declines of 1.7 percent to 8.5 percent.

The Conference Board’s consumer sentiment measure decreased to 65 this month from a revised 65.6 in January that was the highest since March 2008, economists forecast data from the New York-based research group will show at 10 a.m.

Confidence Revised

The Conference Board last week revised the data back to November after announcing changes in its sampling methodology. The change brought last month’s sentiment gauge up from the eight-month high of 60.6 previously estimated. The measure averaged 97 in the six years leading up the recession that began in December 2007 and ended in June 2009.

“Consumer sentiment measures are off the floor but still at historically low levels,” said Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts.

Home prices fell 0.5 percent in December for a second month after adjusting for seasonal variations, according to economists’ estimates for S&P/Case-Shiller.

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 was influenced by transactions in November and October.

Fed View

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.

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.

More Foreclosures

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.

Homebuilder shares have underperformed the broader stock market since the middle of last year. The Standard & Poor’s Supercomposite Homebuilder index of 12 builders has gained 24 percent since June 30, compared with a 30 percent increase for the S&P 500 Index.

                        Bloomberg Survey

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

Date of Release              02/22    02/22    02/22
Observation Period            Dec.     Dec.     Feb.
------------------------------------------------------
Median                       -0.5%    -2.4%     65.0
Average                      -0.4%    -2.7%     64.6
High Forecast                 1.0%    -1.7%     70.0
Low Forecast                 -1.0%    -8.5%     58.5
Number of Participants          17       19       61
Previous                     -0.5%    -1.6%     65.6
------------------------------------------------------
4CAST Ltd.                    ---     -2.3%     63.0
ABN Amro Inc.                -0.4%     ---      65.0
Action Economics              ---      ---      61.0
Ameriprise Financial          ---      ---      66.0
Banesto                       ---     -2.3%     61.5
Bank of Tokyo- Mitsubishi     ---      ---      69.3
Barclays Capital             -0.5%    -2.6%     66.5
Bayerische Landesbank         ---      ---      64.0
BMO Capital Markets           ---     -1.7%     66.0
BNP Paribas                   ---      ---      64.0
BofA Merrill Lynch Research   ---     -2.8%     66.0
Capital Economics            -1.0%    -3.1%     68.0
Citi                          ---      ---      66.0
ClearView Economics          -0.5%     ---      61.0
Credit Suisse                 ---      ---      70.0
Danske Bank                   ---      ---      66.0
DekaBank                      ---      ---      63.5
Desjardins Group              ---     -2.5%     67.0
Deutsche Bank Securities      ---      ---      66.0
Deutsche Postbank AG          ---      ---      67.0
DZ Bank                       ---     -2.4%     64.0
Exane                         ---      ---      62.5
First Trust Advisors          ---      ---      65.6
Helaba                        ---      ---      67.0
HSBC Markets                 -0.5%     ---      67.0
IDEAglobal                    ---      ---      62.0
IHS Global Insight            ---      ---      65.0
Informa Global Markets        ---      ---      60.8
ING Financial Markets        -0.6%    -2.7%     63.0
Intesa-SanPaulo               ---      ---      65.3
J.P. Morgan Chase            -0.5%    -2.6%     67.0
Janney Montgomery Scott      -1.0%    -2.6%     62.6
Jefferies & Co.               ---      ---      67.0
Landesbank Berlin             ---      ---      62.5
Landesbank BW                 ---     -2.3%     65.5
Manulife Asset Management     ---      ---      63.5
Maria Fiorini Ramirez         ---      ---      66.5
Mizuho Securities            -0.6%     ---      64.0
Moody’s Analytics             ---      ---      66.0
Morgan Stanley & Co.          ---      ---      62.0
Natixis                       ---     -1.9%     67.1
Newedge                       ---      ---      66.0
Nord/LB                       ---      ---      66.3
Pierpont Securities           ---      ---      67.0
PineBridge Investments       -0.4%     ---      66.0
Raiffeisenbank International  ---      ---      63.0
Raymond James                 ---      ---      62.5
RBC Capital Markets           ---      ---      64.7
RBS Securities Inc.           ---      ---      61.5
Scotia Capital               -0.5%     ---      64.0
Societe Generale              0.5%    -1.7%     67.9
State Street Global Markets  -0.7%    -8.5%     66.1
Stone & McCarthy Research     ---      ---      63.0
TD Securities                 1.0%     ---      64.0
Thomson Reuters/IFR           ---     -2.3%     58.5
UniCredit Research            ---     -1.9%     60.5
Union Investment              ---      ---      65.5
University of Maryland       -0.5%    -2.6%     60.0
Wells Fargo & Co.             ---      ---      67.9
WestLB AG                    -0.5%    -1.9%     61.5
Wrightson ICAP               -0.3%     ---      65.0
======================================================

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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