Home Prices in 20 US Cities Increase for Third Month, Case-Shiller Shows
Oct. 27 (Bloomberg) -- Home prices in 20 U.S. cities rosein August for a third consecutive month, bolstering the casethat an economic recovery is at hand.
The S&P/Case-Shiller home-price index climbed 1 percentfrom the prior month, seasonally adjusted, after a 1.2 percentincrease in July, the group said today in New York. From a yearearlier, the gauge fell 11.3 percent, less than forecast.
Rising home sales, due in part to government programsincluding the first-time buyer credit and efforts to lowerborrowing costs, have helped stem the slump in property valuesthat precipitated the worst recession since the 1930s. Sustainedgains in household spending, the biggest part of the economy,may be harder to come by as joblessness mounts.
“We’re nearing the bottom in home prices,” said PatrickNewport, an economist at IHS Global Insight in Lexington,Massachusetts. “Right now the government is helping tostabilize housing.”
Stocks in the U.S. rose for the first time in three daysafter the report. The Standard & Poor’s 500 Index was up 0.3percent to 1,069.70 at 9:39 a.m. in New York.
The housing index was forecast to fall 11.9 percent fromAugust 2008, after a 13.3 percent drop in the 12 months ended inJuly, according to the median forecast of 33 economists surveyedby Bloomberg News. Estimates ranged from declines of 11 percentto 13.3 percent. Year-over-year records began in 2001.
The gains over the last three months have been thestrongest since the three months ended in December 2005.
Broad-Based Improvement
Nineteen of the 20 cities in the S&P/Case-Shiller indexshowed a smaller decline year-over-year than in July. Dallasshowed the smallest drop since August 2008, at 1.2 percent,while Las Vegas showed a 30 percent decrease, the most of anycity.
Compared with the prior month, 15 of the 20 areas coveredshowed an increase while four showed a decline. The biggestmonth-over-month gain was in San Francisco, which showed a 2.6percent gain.
In the latest evidence of rising demand, existing homesales in September jumped to a 5.57 million annual rate, morethan economists forecast and the highest in more than two years,according to data from the National Association of Realtorsissued last week.
Housing and manufacturing are leading the stabilization inthe economy, the Federal Reserve said in the Beige Book surveyof conditions in its 12 district banks during September andearly October.
Fed Regions
“Most districts reported that housing market conditionsimproved in recent weeks, primarily from a pickup in sales oflow- to middle-priced houses,” the Fed said.
One risk to the emerging stabilization is foreclosures,which worsen the property glut. Foreclosure rates will climbthrough late 2010, peaking only after the unemployment ratereaches 10.2 percent in the second quarter, Jay Brinkmann, chiefeconomist at the Mortgage Bankers Association, said this month.
Unemployment, which is projected to exceed 10 percent byearly 2010, according to the median estimate in a Bloombergsurvey earlier this month, will also limit demand. Economistsand industry groups are among those projecting home sales willalso cool in the absence of the $8,000 credit for first-timebuyers, due to expire Nov. 30. Lawmakers are debating extendingthe credit.
Home Builder Stocks
The Standard & Poor’s Supercomposite Homebuilding Index hasclimbed 22 percent since the beginning of July on the improvingoutlook for housing, compared with a 16 percent increase in theS&P 500 index. The builder index fell yesterday on concern thatthe tax-credit program may not be extended.
“The residential housing market appears to havestabilized, but it has done so at a very low level,” WilliamFoote, chief executive officer of USG Corp., North America’slargest maker of gypsum wallboard, said Oct. 21 on a conferencecall. The Chicago-based company posted its eighth straight netloss last quarter as sales dropped 32 percent from a year ago.
Robert Shiller, chief economist at MacroMarkets LLC and aprofessor at Yale University, and Karl Case, an economicsprofessor at Wellesley College, created the home-price indexbased on research from the 1980s.
To contact the reporter on this story:Shobhana Chandra in Washington at schandra1@bloomberg.net
Last Updated: October 27, 2009 09:44 EDTSource: Bloomberg
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