The U.S. housing sector's long, painful journey hit another bump in March. Home prices in 20 cities declined at an 18.7 percent annual pace in March -- a larger decline than February's annual pace, according to the S&P/Case-Shiller U.S. National Home Price Index (pdf).

What's more, home prices in the 20-city survey fell at a record 19.1 percent annualized pace in Q1 compared to a year ago. Home prices in the 20-city index fell at 18.6 percent and 19 percent annualized rates in February and January, respectively. Economists surveyed by Bloomberg News had expected the S&P/Case-Shiller Home Price Index to fall 18.4 percent in March. Also, home prices in the 10-city index declined at an 18.6 percent annual rate in March.

One bright spot in the survey data: despite the quarterly data, March was the second consecutive month the 20-city and 10-city indexes did not a post a record annualized decline.

Pervasive declines persist

Otherwise, March's data offered little evidence of a sudden rush of buyers into the housing market. The areas with the largest annual percentage declines were: Phoenix, -36.0 percent; Las Vegas, -31.2 percent; San Francisco, -30.1 percent; Miami, -28.7 percent; Los Angeles, -22.3 percent; and San Diego, -22.0 percent.

Year-over-year percentage price changes in other, major, U.S. cities were as follows: New York, -11.8 percent; Chicago, -18.6 percent; Boston, -8.0 percent; Washington, D.C., -18.4 percent; Atlanta, -15.7 percent; Dallas, -5.6 percent; Denver, -5.5 percent; and Seattle, -16.4 percent.

Still, despite the disappointing March data, John Herrmann, chief economist at Herrmann Forecasting in New Jersey, is in the camp that argues that the housing sector is attempting to form a bottom.

"Things are stabilizing and the inventory of unsold homes is starting to shrink," Herrmann told Bloomberg News Tuesday. "There's a slightly better matching of buyers and sellers in the market and that means sellers have to use slightly less incentive to get their homes sold."

Originally greeted by Wall Street with a shrug, S&P/Case-Shiller home price data rose to market-mover status in 2008 as it became clear that the United States' housing boom during the past decade was, in fact, a bubble fueled considerably by mortgage market excesses, from borrower to lender. The bursting of that bubble triggered record home mortgage foreclosures and mortgage back securities defaults (toxic assets), which led to the financial crisis that the U.S. and world are still trying to end today.

As a result, investors, economists, homebuilders, and homeowners alike now closely monitor Case-Shiller home price data in order to discern clues as to when the housing slump may end -- a recovery that historically has contributed to U.S. GDP growth.

Housing Sector/Economic Analysis: Despite the record Q1 Case-Shiller year-over-year decline, there is room for hope in the U.S. housing market: price declines appear to be decelerating, and inventories appear to have peaked. That said, housing demand remains low in most regions of the U.S., and until home buyers re-emerge, the housing sector will remain in recession.


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