Home prices fell in August, near lows

By Julie Haviv

NEW YORK (BestGrowthStock) – Prices of single-family homes fell for a second straight month in August, hovering around recent lows after the expiration of popular homebuyer tax credits, according a Standard & Poor’s/Case-Shiller home price report on Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas declined 0.3 percent in August from July on a seasonally adjusted basis where a Reuters poll of economists forecast a drop of 0.2 percent. The dip followed a seasonally adjusted decline of 0.2 percent in July.

S&P, which publishes the indexes, also said home prices in the 20 cities index rose 1.7 percent from August 2009, a slower annual pace than the 3.2 percent increase in July.

Unadjusted for seasonal impact, the 20-city index fell 0.2 percent after a 0.6 percent July gain. A 0.2 percent rise was expected.

“A disappointing report. Home prices broadly declined in August. Seventeen of the 20 cities and both composites saw a weakening in year-over-year figures, as compared to July, indicating that the housing market continues to bounce along the recent lows,” David M. Blitzer, chairman of the index committee at Standard & Poor’s, said in a statement.

“Over the last four months both the 10- and 20-City Composites show slowing growth, after sustaining consistent gains since their April 2009 troughs,” he said.

Blitzer said the housing market appears to have stabilized at new lows.

“At this time, it does not seem that any of the markets are hanging on to the temporary momentum caused by the homebuyers’ tax credits,” he said.

The housing market has been struggling since home buyer tax credits expired earlier this year. To take advantage of the tax credits, buyers had to sign purchase contracts by April 30. Contracts originally had to close by June 30, but that was extended by three months.

Cary Leahey, economist at Decision Economics in New York, said the problem right now is the potential shadow inventory of foreclosures. With a flood of foreclosures, which typically sell at steep discounts, in the pipeline, home prices will likely remain depressed for some time.

“If you believe that you can’t have a vibrant economy without a vibrant housing market, then you have to deal with the foreclosure problem,” he said.

Home prices in August reflect conditions before banks temporarily halted foreclosures due to questionable documentation. Home prices may benefit from fewer foreclosures in the mix, but any rise should prove to be temporary.

As of August 2010, average home prices across the United States are back to the levels where they were in late 2003 and early 2004, S&P said.

(Additional reporting by Ellen Freilich, Editing by Chizu Nomiyama)

Home prices fell in August, near lows