Friday, December 30, 2011

MARKET TRENDS: Home Prices Declined in October

Home prices in the United States fell by more than 1 percent in October, a private survey showed on Tuesday, and analysts expect the downward trend will continue in the months ahead.

But neither the discouraging real estate data nor a sharp gain in confidence in a separate report appeared to have much impact on Wall Street, which was winding down the year with light trading.

The Dow Jones industrial average closed down 3 points to 12,291.35, while the Standard & Poor’s 500-stock index rose less than a point to 1,265.43. The Nasdaq composite index was up 0.25 percent to 2,625.20.

Both the S.&P. and the Dow were on track to finish the year in positive territory.

The private Standard & Poor’s/Case-Shiller index, a closely watched measure of home prices, was down 1.2 percent from September, according to data tracking 20 cities.

Nineteen of the 20 cities experienced price declines, with prices reaching new lows in Atlanta since its 2007 peak and in Las Vegas, from its 2006 peak, S.&P. said.

Only Phoenix posted a gain, with a 0.3 percent rise, the Case-Shiller data showed.

The report on housing prices exceeded analysts' forecasts for a 0.4 percent drop for October. The index was down 3.4 percent from a year earlier, with Atlanta recording the worst annualized rate, dropping by 11.7 percent.

“Atlanta and the Midwest are regions that really stand out in terms of recent relative weakness,” said David M. Blitzer, the chairman of the index committee at S.& P.

Many analysts expect the weak American housing market is in store for further declines because of a glut of supply, poor demand, and high rates of joblessness and foreclosures.

Patrick Newport, an analyst with IHS Global Insight, forecast that those factors could force
down prices another 5 percent to 10 percent next year.

“Our forecast is they will hit bottom in the second half of 2012,” said Mr. Newport. “We still will have a lot of foreclosures. That is still going to stay high for another several years.”

However, housing statistics from other sources since the October survey showed relatively healthy activity, Mr. Blitzer wrote in the S.&P. report. Existing home sales rose in November, for example, even though they are at a low annual rate of about 4 million. Single-family housing starts also rose, he noted.

"I think going forward we are going to be bumping along the bottom," he said. "I do not see this as getting ready for a big plunge."

A separate report on Tuesday showed that consumers' confidence in the economy surged in December.

The Conference Board’s consumer confidence index rose to 64.5 in December from 55.2 in November, reaching its highest level since April. Analysts had forecast a level of 58.9.

“Consumer optimism is on the rise as job prospects improve, and the summer doldrums seem to be behind most Americans,” said Chris Christopher, the United States economist with IHS Global Insight. “In November, the unemployment rate fell to 8.6 percent, and gasoline prices are falling, offering some relief to consumer mood and spending.”

The benchmark 10-year Treasury note yield slipped 2 basis points to 2.009 percent from Friday. Markets were closed on Monday.

Christine Hauser New York Times December 27, 2011[]