S&P/Case-Shiller U.S. Home-Price Index Fell 12.7%
By Shobhana Chandra
Home prices in 20 U.S. metropolitan areas fell in February by the most on record, pointing to an imbalance between supply and demand that shows no sign of ending.
The S&P/Case-Shiller home-price index dropped 12.7 percent from a year earlier, more than forecast and the most since the figures were first published in 2001. The gauge has fallen every month since January 2007.
Prices will probably keep sliding as foreclosures push even more properties onto the market just as stricter lending rules limit the number of qualified buyers. Shrinking home values have contributed to a slowdown in consumer spending that may already have tipped the economy into a recession.
“This is just one more strain for consumers, in addition to high energy prices and tight credit,'' said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, which forecast a price decline of 12.4 percent. “Prices are going to continue to fall, probably through the end of next year.''
Prices dropped 2.6 percent in February from a month earlier, after a 2.4 percent decline in January, 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.
The index was forecast to drop 12 percent following a 10.7 percent drop in January, according to the median estimate of 14 economists surveyed by Bloomberg News. Estimates ranged from declines of 12.6 percent to 11 percent.
The group's 10-city composite index, with a history back to 1987, fell 13.6 percent in the 12 months ended in February, also the most ever.
Las Vegas, Miami
Nineteen of the 20 cities in the index showed a year-over- year decrease in prices for February, led by a 23 percent slump in Las Vegas and a 22 percent decline in Miami.
Compared with January, homes in all 20 areas covered dropped in value.
“We're going to continue in this abyss for a while,'' said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Inventories are getting worked off but it's a slow process. Sales and prices will go down.''
Prices remained under pressure in March, reports last week showed. The median price of existing homes sold last month fell 7.7 percent from March 2007, the National Association of Realtors said. The median value of new houses fell 13.3 percent, the most since July 1970, according to the Commerce Department.
The declines have yet to stir buyers. The total number of houses sold in March dropped to a 5.456 million annual pace, the fewest since comparable records began in 1999.
Lenders are trying to devise ways to reduce foreclosures. Bank of America Corp., seeking approval of its Countrywide Financial Corp. takeover, yesterday said it will modify at least $40 billion in troubled mortgage loans over the next two years to keep customers in their homes. The move would help as many as 265,000 homeowners, company officials said.
GMAC LLC, the auto and home lender that General Motors Corp. sold to a private equity group, reported today it lost $589 million in the first quarter as more borrowers fell behind on mortgage payments.
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.
The S&P/Case-Shiller index and another by the Office of Federal Housing Enterprise Oversight track the same home over time and more accurately reflect price trends, economists said.
The gauges from the Commerce Department and the Realtors group can be influenced by changes in the types of homes sold. Higher sales of cheaper homes relative to more-expensive properties will bias the figures down.
Eli Broad, a philanthropist and co-founder of KB Home, the fifth-largest U.S. homebuilder by revenue, yesterday said he expects home prices to drop another 20 percent.
“I don't think we're anywhere near a bottom in housing,'' Broad told Bloomberg TV yesterday at the Milken Institute Conference in
Earnings at homebuilders are suffering as demand falters. Ryland Group Inc., the
“Business conditions have not improved,'' Chief Executive Officer Chad Dreier said in an April 24 conference call with analysts. Closings in the quarter dropped by almost a third from the same time last year and the average price fell by 14 percent, the company said.