S&P Case-Shiller Index Records Broad-Based Declines in Home Prices

Home prices in the United States fell 2.0 percent in the third quarter of 2010, breaking what had been a trend of fairly steady gains since early last year, ""Standard & Poor's"":http://www.standardandpoors.com reported Tuesday.

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The company's closely watched national index had recorded quarter-over-quarter increases in four of the last five three-month periods, including a 4.7 percent rise in the second quarter of this year. S&P says the third-quarter drop puts home prices nationally 1.5 percent below their year-ago levels.

Even with the sudden reverse in the trajectory, housing prices are still above their spring 2009 lows â€" at least that's the case in every city included in S&P's study, all except one Florida stronghold, that is.

""Other than Tampa, Florida, there are no new lows this month,"" explained David M. Blitzer, chairman of the index committee at Standard & Poor's. Still, Blitzer says, ""many analysts will argue that a double dip will be confirmed before spring.""

Blitzer described the latest report as ""weak."" He says that while some of the bad numbers reflect the end of the government's tax incentive for first-time homebuyers, there are a host of other problems weighing heavy on the housing market.

""The national economy is certainly the number one issue for housing,"" Blitzer said. ""Additionally, there is a large supply of houses on the market and further, hidden, supply due to delinquent mortgages, pending foreclosures,

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or vacant homes. New construction is running at less than half the pace needed to meet normal demand, so a sustained recovery could be a ways off.""

The latest ""S&P/Case-Shiller Home Price Indices"":http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa- shows that for the month of September, 18 of the 20 metropolitan areas covered and both composites were down compared to the previous month.

“The only two which weren’t down in September were Las Vegas, which managed to stay a touch above the low set in July, and Washington D.C.,” Blitzer explained. “Overall, there are few, if any, good numbers in this month’s data,” he said.

Washington has shown the most resilience against the recent contraction. It has been up for six consecutive months, beginning in April.

On a month-over-month basis, the index’s 10-city composite fell 0.5 percent in September, and the 20-city composite dropped by 0.7 percent.

The two composites recorded year-over year gains of 1.6 percent for the 10-city reading and 0.6 percent when looking at the 20-city measurement. But Blitzer says September marked the fourth consecutive month where the annual growth rates moderated from their prior month’s pace, confirming a clear deceleration in home price returns.

A ""separate report"":http://www.freddiemac.com/news/archives/rates/2010/3qhpi10.html released Tuesday by ""Freddie Mac"":http://www.freddiemac.com corroborated S&P’s findings. The GSE’s index of home prices based on conventional mortgages registered a 1.9 percent decrease in the third quarter relative to the second, and was down 3.1 percent compared to a year earlier.

Amy Crews Cutts, Freddie Mac’s deputy chief economist, noted that distressed sales, including foreclosed properties and short sales, are still a big part of the market.

“The past three quarters we've seen encouraging numbers in delinquency trends as reported by the Mortgage Bankers Association, though the delinquency rates remain high,” she said. “Our forecast is for economic conditions to continue to improve, which should lower delinquency rates further over the coming year and relieve some of the downward pressure on home prices.""