Home Prices in 20 U.S. Cities Likely Fell in April

A backlog of foreclosures and falling sales indicate prices may decline further, discouraging builders from taking on new projects. Photographer: Joe Raedle/Getty Images

 

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June 27 (Bloomberg) — John Taylor, an economics professor at Stanford University, talks about Federal Reserve monetary policy, the Taylor Rule and prospects for U.S. economic recovery. Taylor speaks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)

Home prices probably decreased in April, showing the housing market remains an obstacle for the U.S. recovery, economists said before a report today.

The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from April 2010, the biggest year-over-year drop since November 2009, according to the median forecast of 30 economists surveyed by Bloomberg News. Other data may show consumer confidence held near a six-month low.

A backlog of foreclosures and falling sales indicate prices may decline further, discouraging builders from taking on new projects. The drop in property values and a jobless rate hovering around 9 percent are holding back consumer sentiment and spending, which accounts for 70 percent of the economy.

“Home prices remain incredibly bogged down by foreclosures and weak demand,” said Sean Incremona, a senior economist at 4Cast Inc. in New York. “The picture is unlikely to change much this year. Declining home prices and high unemployment are bad for confidence.”

The S&P/Case-Shiller index, based on a three-month average, is due at 9 a.m. New York time. Survey estimates ranged from declines of 4.9 percent to 3.5 percent. Values fell 3.6 percent in the 12 months to March.

The New York-based Conference Board’s consumer confidence gauge, due at 10 a.m., rose to 61 from 60.8 in May, according to the Bloomberg survey median. Estimates ranged from 55 to 66.7.

Fuel Costs

Some of the improvement probably reflects a drop in fuel costs. The average price of a gallon of regular gasoline fell to $3.57 on June 26, down from a May 4 price of $3.99 that was the highest in almost three years, according to AAA, the nation’s largest auto club.

The projected rise in confidence contrasts with other surveys in which Americans’ moods dimmed. The Bloomberg Consumer Comfort index dropped in the week ended June 19, the first decline in five weeks, and the Thomson Reuters/University of Michigan sentiment gauge fell more than forecast this month.

The Case-Shiller report may show home prices fell 0.2 percent in April from the prior month after adjusting for seasonal variations, the 10th straight decrease, according to the Bloomberg survey.

The year-over-year gauges provide better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Shiller told a conference in New York this month that a further decline in property values of 10 percent to 25 percent in the next five years “wouldn’t surprise me at all.”

Fewer Sales

Reports earlier this month showed the housing market is yet to gain momentum. Sales of previously owned homes, which comprise about 94 percent of the market, were down 3.8 percent last month from April, the National Association of Realtors said.

Purchases of new houses dropped 2.1 percent in May, the first decline in three months, according to Commerce Department data. Competition from foreclosed homes is hurting demand for newly built dwellings.

The 1.8 million-unit inventory of distressed homes nationwide that may reach the market would take about three years to sell at the current pace, Daren Blomquist, communications manager at RealtyTrac Inc., said this month.

As house prices decline, owners feel less wealthy and home equity shrinks, making borrowing more difficult.

The Standard & Poor’s Supercomposite Homebuilding index lost 4.4 percent as of June 27 from the end of April, less than a 6.1 percent drop in the broader S&P 500 gauge, which was weighed down largely by concern about the European debt crisis.

Builder Outlook

Some developers expect demand to stabilize following a poor selling season. Lennar Corp. (LEN), the third-largest U.S. homebuilder by revenue, last week said second-quarter sales fell from a year earlier and home orders were little changed, while the average price climbed. The 2010 orders were boosted by a federal tax credit for homebuyers that required contracts be signed by April 30.

“While it’s now well documented that the expected spring selling season of 2011 simply did not materialize, it is beginning to feel like the worst days of the housing market are getting behind us,” Chief Executive Officer Stuart Miller said during a conference call with analysts on June 23.

                    Bloomberg Survey

================================================================
                              Case Shiller   Cons. Conf
                              MOM%     YOY%    Index
================================================================

Date of Release              06/28    06/28    06/28
Observation Period           April    April      June
----------------------------------------------------------------
Median                       -0.2%    -4.0%     61.0
Average                      -0.2%    -4.0%     61.0
High Forecast                 0.4%    -3.5%     66.7
Low Forecast                 -0.5%    -4.9%     55.0
Number of Participants          17       30       70
Previous                     -0.2%    -3.6%     60.8
----------------------------------------------------------------
4CAST Ltd.                    ---     -4.1%     61.5
ABN Amro Inc.                -0.1%     ---      61.0
Action Economics              ---      ---      63.0
Aletti Gestielle SGR          ---      ---      60.0
Ameriprise Financial Inc      ---      ---      61.5
Banesto                       ---     -4.1%     61.7
Bank of Tokyo- Mitsubishi     ---      ---      59.0
Bantleon Bank AG              ---      ---      60.0
Bayerische Landesbank         ---     -4.0%     62.0
BBVA                          ---     -3.9%     60.8
BMO Capital Markets           ---     -4.4%     62.0
BNP Paribas                   ---      ---      58.0
BofA Merrill Lynch Resear     ---     -3.9%     61.0
Briefing.com                  ---     -3.8%     59.0
Capital Economics            -0.4%    -4.1%     65.0
CIBC World Markets            ---     -4.2%     62.5
Citi                          ---      ---      61.0
Commerzbank AG                ---     -4.0%     60.0
Credit Agricole CIB           ---      ---      62.0
Credit Suisse                 ---     -3.8%     55.0
Daiwa Securities America      ---      ---      62.0
DekaBank                      ---      ---      61.5
Desjardins Group              ---     -3.9%     61.0
Deutsche Bank Securities      ---      ---      62.0
Exane                         ---      ---      61.5
Fact & Opinion Economics      ---     -3.5%     59.0
First Trust Advisors          ---      ---      59.9
FTN Financial                 ---      ---      60.0
Helaba                        ---      ---      60.0
HSBC Markets                 -0.2%    -3.9%     60.0
Hugh Johnson Advisors         ---      ---      60.5
IDEAglobal                    ---     -4.0%     60.0
IHS Global Insight            ---     -3.9%     61.0
Informa Global Markets        ---      ---      61.0
ING Financial Markets        -0.2%    -3.9%     63.0
Insight Economics             ---     -3.9%     59.0
Intesa-SanPaulo               ---      ---      63.0
J.P. Morgan Chase            -0.1%    -3.8%     60.5
Janney Montgomery Scott L    -0.3%    -4.8%     62.0
Jefferies & Co.               ---      ---      62.0
Landesbank Berlin             ---      ---      58.0
Manulife Asset Management     ---      ---      61.0
Maria Fiorini Ramirez Inc     ---      ---      62.5
MF Global                    -0.5%    -4.2%     60.5
Moody’s Analytics             ---      ---      59.0
Morgan Stanley & Co.          ---      ---      64.0
Natixis                       ---     -4.0%     61.0
Nomura Securities Intl.       ---     -3.9%     59.8
Nord/LB                       ---      ---      60.0
Parthenon Group              -0.4%     ---      59.7
Pierpont Securities LLC       ---      ---      64.0
PineBridge Investments        0.4%     ---      61.5
Raiffeisenbank Internatio     ---      ---      62.0
RBC Capital Markets           ---      ---      62.0
RBS Securities Inc.           ---      ---      59.5
Scotia Capital                ---      ---      59.0
SMBC Nikko Securities        -0.1%    -3.8%     63.0
Societe Generale             -0.2%     ---      66.7
Standard Chartered           -0.3%    -4.8%     61.0
State Street Global Marke     0.1%    -3.6%     60.1
Stone & McCarthy Research     ---      ---      62.5
TD Securities                -0.5%     ---      60.0
UBS                          -0.2%    -3.9%     62.0
UniCredit Research            ---     -4.0%     61.0
Union Investment              ---      ---      61.8
University of Maryland       -0.4%    -4.1%     60.0
Wells Fargo & Co.             ---      ---      59.3
WestLB AG                     ---     -4.9%     60.5
Westpac Banking Co.           ---      ---      60.5
Wrightson ICAP                0.0%     ---      63.0
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net