Home Prices Fall, but Pace Stops Setting Records
Consumer Confidence Improves in April
U.S. home prices continued their multiyear slide in February, according to the S&P/Case-Shiller home-price indexes, but they did stop their 16-month streak of record declines.
Separately, U.S. consumers’ assessment of the economy rose to its highest point of the year in April as households began to see an end to the recession loom into view.
Fifteen of 20 major metropolitan areas posted price declines of more than 10% from a year earlier with the Sun Belt continuing to be hit hardest. Nationally, home prices are at levels similar to the third quarter of 2003.
Economists React: ‘Don’t Get Too Excited’ About Confidence “While the declines in residential real estate continued into February, we witnessed some deceleration in the rate of decline in some of the markets,” said David M. Blitzer, chairman of S&P’s index committee. Still, 10 of the 20 metro areas reported record year-over-year declines.
As of February, the 10-city index is down 32% from its mid-2006 peak and the 20-city is down 31%. The two indexes have fallen every month since August 2006, 31 straight.
The indexes showed prices in 10 major metropolitan areas fell 19% in February from a year earlier and 2.1% from January. In 20 major metropolitan areas, home prices also dropped 19% from the prior year and 2.2% from January.
Again, none of the regions could stave off a decline from January to February, although 16 of the 20 areas saw a smaller decline compared with January. Month-to-month decliners were led by Cleveland, which posted a 5% drop and displaced Phoenix, which saw prices fall 4.5%, from the top spot. Dallas fared best, edging down 0.3%.
For the 11th straight month, no region was able to avoid a year-over-year decline, although nine cities posted better annual returns than they did in January. Phoenix and Las Vegas were again the worst performers, with drops of 35% and 32%, respectively. Phoenix is down 51% from its peak in June 2006. Dallas has been the least hurt, down 11% from its June 2007 peak.
Compared with a year earlier, Dallas and Denver again had the best relative performance, with annual declines of 4.5% and 5.7%, respectively.
What kind of return can you expect on a real estate investment today? Delores Conway, real estate economist, says while people shouldn’t expect to double their investment, they can expect to see gains. Stacey Delo reports. (April 27)
The news comes after government data Friday showed new-home sales fell in March, but only mildly, after a surge the month before. More data last week showed that existing-home sales dropped in March and median prices fell 12%, according to the National Association of Realtors.
The Conference Board, a private research group, reported Tuesday that confidence levels jumped in April, rising to a reading of 39.2, from a revised 26.9 in March. The reading was well above the 29.0 expected by economists, and was the best showing since November.
The improvement in confidence levels comes as recent economic data have shown signs that the economy’s slide is slowing, and stock markets have made solid gains. A stabilization in economic conditions is expected to set the stage for recovery later in the year, although most economists and policy makers expect to see only a modest rebound, with job losses continuing for some time.
Still, an improvement in confidence is welcome, because that can help get consumers spending again after sharp cut backs in the face of uncertainty and tough times.
Lynn Franco, who leads the Conference Board Consumer Research Center, tied the improvement in April confidence mostly to “a significant improvement in the short term outlook.”
In the report, the present situation index marked a modest gain to 23.7, from March’s 21.9, but the expectations index surged to its best reading since September, at 49.5 in April, from 30.2 last month.
The expectations index is now back at levels seen at the time of investment bank Lehman Brothers’ collapse last September. Many observers, including Federal Reserve officials, now believe that event caused a significant worsening in the recession, and that much of the recent improvement is in fact bringing the economy back to the conditions seen at that time.
Still, even with April’s improvement, consumers remain a worried bunch. Those who see business conditions as bad are down compared to the month before, but they still comprise 45.7% of the survey. Those that see business conditions as good only represent 7.6% of respondents, up modestly from 6.9% in March.
The report noted that views on the job market were mixed, with those calling jobs “hard to get” falling to 47.9% of the survey, from 48.8% in March. Meanwhile, those calling jobs plentiful ebbed to 4.5%, from 4.7% in March. There was more movement on the jobs outlook, with those expecting fewer jobs to come available falling, and those expecting more hiring to rise.
By KERRY E. GRACE and MICHAEL S. DERBY
Source: Wall Street Journal