Nationwide home prices dip, despite buying fever
Despite the home-buying fever brought on by the tax credits, the price of homes in most major American markets slipped. (May 24,2010) Credit: AP
Home prices fell in March from the previous month, a sign of a weakening housing market despite historically low mortgage rates and now-expired tax credits.
The Standard & Poor's/Case-Shiller 20-city home price index released Tuesday posted a 0.5 percent drop from February.
Prices in 13 of the 20 cities tracked by the index fell month over month. Only six metro areas recorded price gains. One, Boston, came in flat. The New York Metro area recorded a 0.7 percent decrease.
On Monday the National Association of Realtors reported that sales of previously occupied homes rose 7.6 percent in April, boosted by the low mortgage rates and government incentives. But the improvements aren't likely to last as the tax credit expired on April 30.
In a healthier economy, extraordinarily low mortgage rates would pump up demand for homes. But economists say the job market is too weak and credit is too tight.
In Tuesday's report, Detroit and Chicago saw the largest monthly declines at 4.1 percent and 2.3 percent, respectively. Cleveland enjoyed the biggest gain at 1.8 percent.
The numbers are especially disturbing because they show that improved sales due to the tax credits didn't translate into higher prices, said David M. Blitzer, Chairman of the S&P index committee.
New buyers were offered a credit worth up to $8,000, while current owners who bought and moved into another home could get one for up to $6,500. To receive them, buyers had to have a signed offer by April 30 and must close by the end of June.
"When you look at recent trends, there are signs of renewed weakening in home prices," he said in a statement.
This is discouraging for American homeowners who have seen the value of their largest asset deteriorate significantly over the last three years. If the home prices dip again, consumers may curb their spending and threaten the nascent economic recovery.
And for homeowners struggling to pay their mortgages, falling home prices makes it even harder to refinance into an affordable home loan. Mortgage delinquencies were at a record high in the first quarter.
Nationally, prices have climbed nearly 3 percent from their April 2009 bottom. But they remain nearly 31 percent below their July 2006 peak.
In the first quarter of 2010, U.S. home prices fell 3.2 percent compared with the fourth quarter.
