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Home prices give up ground
Consumers’ confidence falls
Home prices and consumer confidence took a turn for the worse in recent weeks, economic reports said Tuesday.
The Conference Board reported its consumer confidence index this month fell to the lowest level since February, while Standard & Poor’s Corp. said that home prices decelerated again in July.
An index of prices in the top 20 American cities showed an annual gain of 3.2 percent, down from 4.2 percent in June, S&P said. Prices overall are at levels last seen in late 2003.
Home prices have been sliding since the expiration of a federal tax credit for homebuyers in April.
While home prices rose in half the cities — including Washington — from June to July, they fell in the other half, suggesting that some areas of the country have slipped back into a double-dip housing recession. Home prices in Las Vegas, one of the cities hit hardest when the housing bubble burst, fell to a new low.
S&P analyst David Blitzer said residual support from the tax credit may help prices through the end of this month, but after that they will stay level at best.
“The next few months may give us an idea of the true strength of the housing market, as the temporary economic stimuli will have ended,” he said. Most other housing indicators besides prices — including sales and construction starts — have already relapsed into recession.
Existing home sales collapsed in July and remained near a 15-year low in August, while new home sales were at near-record lows in July and August.
Mr. Blitzer noted that foreclosures have continued at a brisk pace, posing a threat to home prices where many homes are being auctioned off. Foreclosed homes typically sell for a third less than houses put on the market by their owners.
Patrick Newport, economist at IHS Global Insight, said that a massive glut in housing due in part to surging foreclosures will cause prices to fall another 6 percent to 8 percent in the next year.
“Now that the tax credits are behind us, the evidence is accumulating that demand for housing is extremely weak,” he said.
Anthony Sanders, a professor of real-estate finance at George Mason University, said the federal tax credit caused few lasting gains and created distortions in the housing market.
“The homebuyer’s tax credit was a very expensive reshuffling of deck chairs,” he said. “It simply moved home purchases from the usual summer period back to the spring.”
Moreover, the credit appeared to help wealthier urban areas the most, he said.
“The month-to-month increases were primarily in Washington, D.C., New York, San Francisco and Chicago, the most expensive cities in the U.S.,” he said. “When you move away from the urban fortresses, the housing market is still dead.”
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