Case-Shiller Home Price Index, home for saleThe U.S. housing sector's long, slow journey to health has paused: U.S. home prices in 20 cities dipped 0.1% in February on a seasonally adjusted basis, according to the S&P/Case-Shiller U.S. National Home Price survey. That's slightly less than what economist surveyed by Bloomberg News had expected: a drop of 0.2% on a seasonally adjusted basis after rising 0.3% in January. On a year-over-year basis, the 20-city index rose 0.6%, and 10-city index rose 1.4% in February.

David M. Blitzer, chairman of the Index Committee at Standard & Poor's, said recent housing data are creating a question mark regarding the sector's recovery in 2010.

"Beginning last November, each report showed gains as fewer cities reported year-over-year declines than in the previous month; those gains ended with this report," Blitzer said in a statement. "Further, in six cities prices were at their lowest levels since the prices peaked three to four years ago. These data point to a risk that home prices could decline further before experiencing any sustained gains. While the year-over-year data continued to improve for 18 of the 20 MSAs [metropolitan statistical areas] and the two Composites, this simply confirms that the pace of decline is less severe than a year ago. I

Year-over-year percentage price changes in major U.S. cities were as follows: New York, down 4.1%; Chicago, down 3%; Boston, up 1.8%; Washington, D.C., up 5%; Atlanta, down 0.9%; Miami, down 4.4%; Dallas, up 2.6%; Denver, up 3.6%; Seattle, down 5.6%; Los Angeles, up 5.3%; and San Francisco, up 11.9%.

A Price Dip Consistent With Rising Inventories

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 U.S. housing boom during the past decade was, in fact, a bubble fueled considerably by mortgage market excesses, from lenders to borrowers. The bursting of that bubble triggered record home mortgage foreclosures and defaults among mortgage-backed securities defaults, which led to the financial crisis that the U.S. and world are still trying to end today.

February's data revealing a slight dip in prices were a disappointment, but it's consistent with recent rises in inventories. That said, investors and potential homebuyers should keep in mind that the housing market is in the spring/summer season, when sales typically rise. However, the federal homebuyer tax credit expires April 30, 2010, so that boost will soon dissipate.

What would really help firm home prices prices? Sustained job growth, which both increases household formation and lifts consumer confidence.

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