Uptick be­lies fore­casts for home prices

The Case-Shiller in­dex rises in July, but econ­o­mists ex­pect a glut of fore­clo­sures.

Los Angeles Times - - Business - Ale­jan­dro Lazo ale­jan­dro.lazo@latimes.com

Econ­o­mists said they ex­pected weak growth in hous­ing and a de­cline in home prices this year de­spite a re­port Tues­day in­di­cat­ing that home val­u­a­tions crept up in July.

The Stan­dard & Poor’s/ Case-Shiller in­dex of 20 metropoli­tan ar­eas showed that prices of pre­vi­ously owned sin­gle-fam­ily homes rose 0.6% in July from June and 3.2% over July 2009.

The closely watched in­dex en­com­passes data from May, June and July. Al­though sales plum­meted in July they were bol­stered by pop­u­lar fed­eral tax cred­its for buy­ers in May and June. Other hous­ing in­di­ca­tors, such as starts for new con­struc­tion and some price mea­sures, also have shown weak­ness.

“The hous­ing mar­ket is in aw­ful shape; it is prob­a­bly as bad as it has been in 60 years,” said Pa­trick New­port, U.S. econ­o­mist for con­sul­tancy IHS Global In­sight. “You have weak de­mand, a lot of fore­clo­sures and a big glut, and even though the Case-Shiller num­bers were up for the month, we still think they are go­ing to drop.”

Sep­a­rately, an in­dex of con­sumer con­fi­dence fell to a seven-month low in Septem­ber af­ter hav­ing im­proved in Au­gust, ac­cord­ing to data re­leased Tues­day, un­der­scor­ing con­cern Amer­i­cans have about the econ­omy and their fu­ture prospects.

The mar­ket for pre­vi­ously owned homes swooned in July, with sales drop­ping 27% to the low­est level in more than a decade af­ter the boost from the fed­eral tax credit evap­o­rated, ac­cord­ing to the Na­tional Assn. of Real­tors. That num­ber im­proved some­what in Au­gust, ris­ing 7.6%, but was not enough to stir con­fi­dence that the hous­ing mar­ket would re­cover ro­bustly this year.

Celia Chen, a hous­ing econ­o­mist for Moody’s Econ­omy.com, said she ex­pected prices to fall as more banks step up their re­pos­ses­sion of homes through fore­clo­sure and put those prop­er­ties back on the mar­ket. Len­ders have been seiz­ing houses at a record clip this year, tak­ing back 95,364 U.S. prop­er­ties in Au­gust, ac­cord­ing to Irvine-based Real­tyTrac, the high­est monthly to­tal in the re­search firm’s records.

“Even­tu­ally those homes are go­ing to end up as dis­counted for-sale homes and will pull down prices,” Chen said. “So we are in for weak­ness.”

Prices in 12 of the 20 cities mea­sured by the Case-Shiller in­dex in­creased in July over June. The non­sea­son­ally ad­justed in­dex showed home prices in Cal­i­for­nia cities con­tin­ued to ap­pre­ci­ate, with Los An­ge­les up 0.3% from June, San Diego up 0.7% and San Fran­cisco up 0.5%.

Some of the cities that saw the biggest gains were Detroit, up 1.6% from the pre­vi­ous month; New York, 1.3%; Washington, 1.1%; and Chicago, 1%.

Cities that de­clined in­cluded Las Ve­gas, which fell the most, 0.8%; Phoenix, down 0.6%; and Den­ver, 0.4%.

Sep­a­rately, the Con­fer­ence Board Con­sumer Con­fi­dence In­dex, dropped to 48.5 in Septem­ber, down from 53.2 in Au­gust. The in­dex is based on the Con­fer­ence Board’s sur­vey of 5,000 U.S. house­holds.

The pri­vate re­search group started the sur­vey in 1967. The in­dex is bench­marked to con­sumer sen­ti­ment in 1985, be­cause that year was nei­ther a peak nor a trough, and any read­ing above 100 in­di­cates strong growth.

Stu­art Hoff­man, chief econ­o­mist for PNC Fi­nan­cial Ser­vices Group, called the num­ber dis­ap­point­ing and an in­di­ca­tion that con­sumers re­main “fickle.”

The present sit­u­a­tion in­dex, a Con­fer­ence Board gauge of con­sumer sen­ti­ment about cur­rent eco­nomic con­di­tions, fell to 23.1 from 24.9. The board’s ex­pec­ta­tions in­dex, which mea­sures con­sumer sen­ti­ment about what fu­ture eco­nomic con­di­tions will bring, also fell, to 65.4 from 72.

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