January home prices drop more than expected
— -- Home prices in January plunged a record 19% from a year ago in 20 U.S. metropolitan areas, signaling continued distress in the housing market, according to a report Tuesday.
The year-over-year drop in the Standard & Poor's/Case-Shiller index was more than many economists had expected. All 20 areas showed annual declines, and in nine of them, prices fell more than 20%.
Prices are falling amid a glut of unsold homes that includes a growing supply of foreclosed properties with well-below-market prices.
The cities in Case-Shiller's 20-city index with the steepest year-over-year declines were Phoenix, down 35%; Las Vegas, off 32.5%; San Francisco, down 32.4%; and Miami, off 29.4%.
"The places with the biggest housing bubbles were California, Nevada and Florida, so they had the biggest declines. Most other states had bubbles but not nearly as big," says Patrick Newport at IHS Global Insight. "Still, it's a grim report. January was a terrible month for housing."
The 20-city home-price index fell 2.8% in January compared with December, setting a record for the steepest month-to-month decline.
The data don't reflect several recent initiatives, including an $8,000 tax credit for first-time home buyers that passed in February and the Obama administration's housing rescue program, which includes $75 billion for preventing foreclosures.
It also doesn't capture the recent rise in mortgage applications that has accompanied falling interest rates. Freddie Mac reported last week that the average for a 30-year, fixed-rate mortgage fell to 4.85% from the week before, the lowest since its weekly survey began in 1971. The average rate was 5.85% a year ago.
"We've seen better news recently, like sales of new and existing homes," says Bernard Baumohl, chief global economist at Economic Outlook Group. "We don't believe the index has incorporated what appears to be a bottoming out in the housing sector in terms of demand. Recent reports show housing is stabilizing."
A bright spot: The median price of existing homes rose from $164,800 in January to $165,400 in February, the first increase since June, the National Association of Realtors says. Existing home sales also rose 5.1% in February.
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