By Timothy R. Homan
July 29 (Bloomberg) -- Home prices in 20 U.S. metropolitan areas fell at a faster pace in May, indicating the three-year housing slump has not stabilized, a private survey showed today.
The S&P/Case-Shiller home-price index dropped 15.8 percent from a year earlier, the biggest decline since records began in 2001, after decreasing 15.2 percent in April. The gauge has fallen every month since January 2007.
Stricter loan rules, rising mortgage rates and an increase in foreclosures are making it more difficult for prospective buyers to get financing, hurting home sales. The prolonged real-estate slump, along with higher fuel prices a shrinking job market, is weighing on consumers and the economy.
``We're going to see continued declines in house prices, much more so in problem areas,'' Mickey Levy, chief economist at Bank of America Corp. in New York, said in an interview with Bloomberg Television. ``The decline in home prices, while necessary to clear the inventories, is building in expectations of more house-price declines, which is keeping potential buyers on the sidelines.''
Home prices decreased 0.9 percent in May from the prior month after declining 1 percent in April, the report showed. The figures aren't adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month to month.
Forecast
The index was forecast to fall 16 percent from a year earlier, after a previously reported 15.3 percent drop in the 12 months ended in April, according to the median forecast of 25 economists surveyed by Bloomberg News. Estimates ranged from declines of 14.8 percent to 17 percent.
For an economic recovery to take place, ``you've got to see a bottom in the housing market,'' Richard Clarida, global strategic adviser at Pacific Investment Management Co. and a professor at Columbia University in New York, said yesterday in an interview with Bloomberg Radio. ``At minimum, the housing market needs to stabilize, and we're not there yet.''
For the second consecutive month, all of the 20 cities in the index showed a year-over-year decrease in prices for May, led by 28 percent slumps in Las Vegas and Miami.
On a month-to-month basis, 13 of the 20 areas covered showed a drop in home prices. The same two cities led the month-over-month decreases.
Regional Differences
``Regional patterns stand out,'' David Blitzer, chairman of the index committee at S&P, said in a statement. The areas that once boomed, such as Miami and Las Vegas, are now showing the biggest declines, he said. Areas in the Midwest, including Detroit and Cleveland, are showing signs of economic stress.
The pickup in the pace of overall price decreases from last year contrasts with other private and government measures that indicated values were declining at a slower pace.
The median price of existing houses fell 6.1 percent in June from the same month last year, compared with an 8.5 percent decrease registered in the 12 months ended in April, according a report from the National Association of Realtors last week.
The cost of new homes, as reported by the Commerce Department, dropped 2 percent last month from June 2007. In the year ended in March, the decrease was 13 percent, the biggest in almost four decades.
Regional Mix
The gauges from Commerce and the Realtors group can be influenced by changes in the regional composition or types of homes sold. Purchases in areas with more expensive homes relative to cheaper properties will bias the figures up.
In contrast, the S&P/Case-Shiller index, and another by the Office of Federal Housing Enterprise Oversight, track the same houses over time and more accurately reflect price trends, economists said.
Reports last week showed home sales remained weak. Purchases of existing homes, which account for about 85 percent of the U.S. housing market, fell 2.6 percent in June to a 4.86 million annual rate, the lowest level in a decade, the National Association of Realtors said July 24.
New-home sales for June decreased 0.6 percent to a 530,000 pace, the Commerce Department said July 25. The same report showed the number of new properties on the market dropped by the most in 45 years, a sign that builders are making progress in clearing out inventories.
1980s Research
Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.
Residential construction companies are struggling to maintain profits. Pulte Homes Inc., the third-largest U.S. homebuilder, reported a second-quarter loss of $158.4 million last week.
``We see no immediate signs of this housing downturn relenting,'' Pulte Chief Executive Officer Richard Dugas said in a conference call with analysts.
Congress last week passed legislation designed to bolster market confidence in Fannie Mae and Freddie Mac, the largest U.S. purchasers of mortgages, while stemming foreclosures for 400,000 homeowners. President George W. Bush is expected to sign the bill into law this week.
One in every 171 households was in some stage of the foreclosure process, an increase of 121 percent from a year earlier, RealtyTrac Inc., a real estate database firm, said last week in a statement.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Posts
No comments:
Post a Comment