Home prices take a dive

WASHINGTON -- Residential real estate prices in the U.S. dropped in February by the most in more than a year, a sign the housing market is struggling to stabilize.

The S&P/Case-Shiller index of property values in 20 cities fell 3.3 percent from February 2010, the biggest year-over-year decrease since November 2009, the group said Tuesday in New York. The decline matched the median forecast in a Bloomberg News survey.

All but one of the 20 cities in the index showed a year-over-year decline, led by an 8.4 percent slump in Phoenix and an 8.3 percent decrease in Minneapolis. Home prices in Washington were up 2.7 percent from a year ago. In February, prices in 10 markets, including Las Vegas, dropped to fresh lows from their 2006 and 2007 peaks. Besides Las Vegas, those areas include Atlanta, Chicago, Miami and New York.

Las Vegas-based SalesTraq reported the existing-home median price at $108,000 in March, a 10 percent decrease from the same month a year ago and the lowest median since 1990. New-home closing prices fell 6.5 percent to $195,950.

The gap between new and existing home prices in Las Vegas has widened to $88,000, compared with $7,000 in 1996, SalesTraq President Larry Murphy noted. It was $37,000 in 2003 and $43,000 in 2006. Will the gap someday narrow back to pre-2006 levels?

"In my opinion, yes. It has to because existing homes today are tremendously undervalued," Murphy said.

Housing prices in Las Vegas continue to be dragged down by foreclosures and short sales, which comprise about 75 percent of monthly sales activity.

SalesTraq reported an average price of $65 a square foot for homes sold at trustee auction; $71 a foot for real estate-owned, or bank-owned, home sales; $80 a foot for short sales, or sales for less than the principal mortgage balance; and $88 a foot for traditional, nondistressed home sales.

Increases in foreclosures are adding to a growing inventory of unsold homes, which may further depress prices and dissuade potential buyers. Declining property values also limit construction and restrain consumer spending as homeowners have less equity.

"We see weakness in home prices nationally in the first half of this year because of the large pipeline of foreclosures," said Michael Gapen, a senior U.S. economist at Barclays Capital in New York. "The speed of the economic recovery will be more moderate given the state of the U.S. housing sector."

Home prices fell 0.2 percent in February from the prior month after adjusting for seasonal variations. Unadjusted prices dropped 1.1 percent from the prior month after 19 of 20 cities showed declines. Detroit posted an unadjusted 1 percent gain in February from a month earlier.

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

The Case-Shiller measure is based on a three-month average, which means the February data was influenced by transactions in January and December.

"There is very little, if any, good news about housing," David Blitzer, chairman of the Case-Shiller index committee at S&P, said in a statement. "The 20-city composite is within a hair's breadth of a double-dip."

The 20-city index fell in February to 139.27, compared with a recession low of 139.26, reached in April 2009.

Real estate markets for single-family homes "either were little changed from low levels or continued to weaken across all districts," in February and March, according to the Federal Reserve's Beige Book. For homebuilders, "the spring building season is likely to be slower than previously anticipated," the Fed said in its April 13 regional report.

The median price of existing homes, which make up more than 95 percent of the market, dropped 5.9 percent in March from a year earlier, according to the National Association of Realtors. New-home prices fell from a year earlier as well, a Commerce Department report showed.

With unemployment close to 9 percent, home values declining and a swelling supply of unsold properties, confidence among U.S. homebuilders fell in April. The National Association of Home Builders/Wells Fargo sentiment index declined to 16 from 17 in March, the Washington-based group said last week. Readings below 50 mean more respondents said conditions were poor.

Frank Wyatt, president of Las Vegas-based Pinnacle Homes, said building material prices are going up, including a 20 percent increase in concrete, and builders may not be able to capture those increases in home prices.

That means builders will have to make up for it with a low land basis and look for lots that make financial sense, Wyatt said.

Review-Journal writer Hubble Smith contributed to this report.