Home prices weakened in September
Home prices cooled more than expected in September, falling 0.7% from August, according to data released Tuesday, indicating a sustained recovery in the nation’s housing market is probably some time away.
Prices of previously owned single-family homes rose 0.6% in September over the same time last year, according to the Standard & Poor's/Case-Shiller index of 20 metropolitan areas. That was worse than most economists expected, according to Bloomberg News, and the smallest year-over-year gain since February, when the market began to recover.
The housing market has weakened considerably since federal tax credits of up to $8,000 drove sales during the spring and first-time buyers flooded into the market, boosting sales of entry-level homes. But economists said more was at play than simply the lack of government stimulus.
“The national economy is certainly the No. 1 issue for housing,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor's. “Additionally, there is a large supply of houses on the market and further, hidden, supply due to delinquent mortgages, pending foreclosures or vacant homes.”
Out of the 20 metro areas measured by the index, 18 posted declines in September, when the data was left unadjusted for seasonal differences. Only Las Vegas, up a meager 0.1%, and Washington, up 0.3%, posted increases.
In California, Los Angeles fell 0.1%, San Diego 1% and San Francisco 0.9%.
[Updated at 7:25 a.m. PST] Aside from the monthly data on the 20 metro areas, S&P also released its U.S. National Home Price Index – a broader measure of national home prices released quarterly. The national index fell 2% in the third quarter of 2010, after having risen 4.7% in the second quarter.
Anthony Sanders, a real estate finance professor at the Mercatus Center at George Mason University, said further declines are likely as potential buyers shy away from housing.
“People are still fearful of jumping into housing again despite low interest rates,” he said. “They are still not sure what is going to happen with taxes in January, and they don’t want to commit.”
And in a separate report, consumer confidence improved in November, according to data released Tuesday morning. The Conference Board Consumer Confidence Index rose to 54.1 this month up from 49.9 in October.
The present situation index, which measures how consumers feel about their current state, rose to 24 from 23.5. The expectations index, which measures how people feel about their future prospects, increased to 74.2 from 67.5 last month.
“Consumer confidence is now at its highest level in five months, a welcome sign as we enter the holiday season,” said Lynn Franco, director of the Conference Board Consumer Research Center. “Consumers’ assessment of the current state of the economy and job market, while only slightly better than last month, suggests the economy is still expanding, albeit slowly.”
But Paul Dales, U.S. economist for Capital Economics, said he was worried the decline in housing would only serve to drag back consumer confidence in the months to come.
“We are concerned that the further rebound in consumer confidence in November will not translate into a sustained acceleration in consumption growth when the unemployment rate remains high and a double dip in house prices is underway,” he said. “Continued weak demand and with high supply will mean that prices will soon fall to a new cycle low. That won't cheer up households one bit.”
The index is based on the Conference Board’s survey of 5,000 U.S. households. The private research group started the survey in 1967. The index is benchmarked to consumer sentiment in 1985, because that year was neither a peak nor a trough, and any reading above 100 indicates strong growth.
-- Alejandro Lazo