Home Prices Hit New Depths
Home prices fell to fresh lows in December, but
economists say that a drop in the number of homes listed for sale could
help stabilize prices in parts of the country this year. Home prices
fell by 4% last year, according to the Standard &
Poor's/Case-Shiller index that tracks 20 metro areas. Prices dropped by
1.1% for the three-month period ending in December compared with the
same period ending in November.That was slightly better than November's
reading, when prices were down 1.3% from October.
Home Prices Hit New Depths
By NICK TIMIRAOS
Home prices fell to fresh lows in December, but economists say that a drop in the number of homes listed for sale could help stabilize prices in parts of the country this year.
Home prices fell by 4% last year, according to the Standard & Poor's/Case-Shiller index that tracks 20 metro areas. Prices dropped by 1.1% for the three-month period ending in December compared with the same period ending in November.That was slightly better than November's reading, when prices were down 1.3% from October.
One surprising development in many housing markets is that the supply of homes for sale has fallen to a five-year low. While that normally would be a sign of health, real-estate agents say a paucity of homes is holding back sales.
Tuesday's report is the latest evidence that the housing market still faces a cloudy outlook after a six-year downturn. The inventory of homes for sale has contracted, reducing competition among sellers, according to The Wall Street Journal's quarterly survey of housing-market conditions in 28 metro areas.
But a large potential backlog of foreclosed properties hangs over many housing markets. Other headwinds including tight mortgage-lending standards that show few signs of easing.
"These are times of continued, great uncertainty about home prices," said Robert Shiller, the Yale University economist who co-founded the index that bears his name. "We might be on the verge of a home recovery, but then, maybe not."
Others are becoming somewhat optimistic. Thomas Lawler, an independent housing economist in Leesburg, Va., said the S&P/Case-Shiller index should hit a bottom this spring. He said many analysts have overlooked positive developments, including a dearth of new construction and the falling share of homes selling out of foreclosure.
"You don't hear very many people talk about the actual housing stock, and how slow it's growing," he said, while conceding that it is "absolutely true that organic demand has yet to show any material rebound."
Even when prices stop falling, they aren't likely to rise for years, leaving millions of homeowners stuck in properties worth less than what they owe. "We're looking at an L-shaped recovery," said Stan Humphries, chief economist at real-estate website Zillow, who predicts another 3.7% decline in home prices for the coming year.
MarketWatch's Rex Nutting checks in on Mean Street with a look at continued weak housing and high debts and those two factors are holding back the economic recovery. Photo: AP.
In most of the country, home prices aren't falling at anywhere near their jaw-dropping pace of 2008. But only two markets showed an increase in home prices during the fourth quarter. In Phoenix, home prices were up by 0.8%, while Miami reported a smaller gain of 0.2%. Detroit was the only city to post a year-over-year gain, rising by 0.5%.
Home prices in Atlanta, meanwhile, fell by 12.8% last year, while Chicago posted a 6.5% decline.
"Do you really want to take one of your biggest assets and sell it at the lowest value on record?" said Clark Wood, who leased out his four-bedroom home in Las Vegas late last year rather than sell it after he moved to Rockland, Calif., to take a better job.
Mr. Wood, 49, says he doesn't plan to sell the house until values recover, even if that means carrying two properties for five years or longer. The house is worth slightly more than the $260,000 he paid for it in 1998, and he has a small mortgage that he can cover with the rental income.
At the current sales rate, it would take about four months to sell the supply of homes on the market in Denver, Washington, D.C., and Orange County, Calif. That level is lower, at less than three months, in Phoenix and San Francisco, and has dropped to just 1.9 months in Sacramento, Calif., according to figures compiled by John Burns Real Estate Consulting.
"The TV and the papers make it seem like there's a ton of houses out there, but it's been a shock to us," said Andy Rysdam, 24, who is looking to buy his first home in Phoenix. He said he isn't worried about buying and then seeing prices tumble "because it doesn't seem like they can go much lower."
But several markets still face supply-demand imbalances that could keep pressure on prices. New York's Long Island had a 13-month supply of homes at the end of the fourth quarter. Nashville and Charlotte, N.C., had a 12-month supply, and northern New Jersey had a nearly 11-month supply.
Those numbers will rise if banks sell more foreclosed properties as they correct deficient mortgage-handling practices.
Inventories also could rise if more sellers follow in the footsteps of Ian Flatt. In December, he listed his Las Vegas home and soon will ask the bank to agree to sell it for less than what he owes in what's known as a short sale. For the past year, Mr. Flatt had been renting out the propertyat a $1,200 monthly lossafter he moved to Southern California to take a better job in 2010.
"It didn't seem to make sense to send good money after bad," said the 38-year-old human-resources consultant. The home is listed for about $130,000, or half what he paid for it in April 2008.