J.W. Elphinstone, AP Real Estate Writer, On Tuesday May 25, 2010, 10:27 am
NEW YORK (AP) — Home prices fell in March from the previous month, a sign of a weakening housing market despite historically low mortgage rates and now-expired tax credits.
The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday posted a 0.5 percent drop from February.
Prices in 13 of the 20 cities tracked by the index fell month over month. Only six metro areas recorded price gains. One, Boston, came in flat.
Detroit and Chicago saw the largest monthly declines at 4.1 percent and 2.3 percent, respectively. Cleveland enjoyed the biggest gain at 1.8 percent.
The numbers are especially disturbing because they show that improved sales due to the tax credits didn’t translate into higher prices, said David M. Blitzer, Chairman of the S&P index committee.
“When you loot at recent trends, there are signs of renewed weakening in home prices,” he said in a statement.
Falling home prices haven’t kept consumers from keeping an optimistic view of the economy.
A separate report Tuesday showed consumer confidence rose in May for the third straight month as hopes for job growth improved. The increase in the Conference Board’s Consumer Confidence Index was boosted by consumers’ outlook for the next six months.
But American shoppers’ positive attitude may not be enough to sway Wall Street investors, who fear the European debt crisis could hammer the global economy. The Dow Jones industrial average fell nearly 200 points Tuesday in early trading.
In a healthier economy, extraordinarily low mortgage rates would pump up demand for homes. But economists say the job market is too weak and credit is too tight.
Sales of previously occupied homes rose 7.6 percent in April, the National Association of Realtors said Monday. But the sales were aided by government incentives that have now expired and economist don’t expect the improvements to last.
New buyers were offered a credit worth up to $8,000, while current owners who bought and moved into another home could get one for up to $6,500. To receive them, buyers had to have a signed offer by April 30 and must close by the end of June.
The declining home prices are discouraging for American homeowners who have seen the value of their largest asset deteriorate significantly over the last three years. If home prices dip again, consumers may curb their spending and threaten the nascent economic recovery.
And for homeowners struggling to pay their mortgages, falling home prices makes it even harder to refinance into an affordable home loan. Mortgage delinquencies were at a record high in the first quarter.
Nationally, prices have climbed nearly 3 percent from their April 2009 bottom. But they remain nearly 31 percent below their July 2006 peak.
In the first quarter of 2010, U.S. home prices fell 3.2 percent compared with the fourth quarter.
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Tags: Housing Market Conditions, Housing Market News, Real Estate Investment