Stephanie Armour
USA Today

A key home price index fell in February in a sign the housing recovery is not yet on stable footing.

The Standard & Poor’s/Case Shiller Index of 20 metro areas dropped 0.9% from January on a non-seasonally-adjusted basis, according to a report Tuesday.

But on an annual basis, home prices showed their first gain in more than three years: The 20-city composite index grew 0.6% from the same time last year and a 10-city composite index was up 1.4% from February 2009.

Separately, Americans’ confidence in the economy rose in April to the highest level since September 2008, reports Tuesday said.

On a monthly basis, home prices in 19 of the 20 metro areas declined in February over January, and economists warn prices may drop further in coming months.

“We do have lower prices in the second half of the year, but pretty flat for the year (as a total),” says Stuart Hoffman, chief economist at PNC Financial Services Group. “Do I think there will be some big drop off in prices? I think there will be a bit of a modest dropoff in prices.”

Fourteen of the metro areas and both composites have now fallen for at least four consecutive months. In addition, prices in February reached recent new lows for six cities —— Charlotte, Las Vegas, New York, Portland, Seattle and Tampa.

Some economists say the price drops may be part of a normal seasonal decline.

“Prices may wobble down in the wintertime,” says Mark Fleming, chief economist with First American CoreLogic. “They rebound in spring and summer when home buying resumes. It’s two steps forward and one step back.”

As of February, average home prices are at similar levels to where they were in late summer/early autumn of 2003. From their peak in June/July of 2006 through the trough in April 2009, the 10-city composite is down 33.5% and the 20-city composite is down 32.6%.

San Diego was the only market that continued to show improvement in home prices from January to February. All other metros and the two composites declined from their January levels, with 12 of the metro areas falling at least 1.0% during the month.

Several factors are adding to downward price pressures, including slowing home sales in the winter and a growing inventory of homes for sale, Fleming says.

“There are elevated levels of inventory and they have lept up over the winter because of the pace of sales,” he says.

Total housing inventory at the end of March rose 1.5% to 3.58 million existing homes available for sale, which represents an 8-month supply at the current sales pace, down from an 8.5-month supply in February.

On confidence, the Conference Board said that its Consumer Confidence index increased to 57.9, from a revised 52.3 in March. The April reading is the highest since September 2008’s 61.4. That was when the financial crisis intensified with the collapse of Lehman Brothers, sending confidence into freefall the following month. Economists surveyed by Thomson Reuters were expecting a reading of 53.5.

The index, which measures how shoppers feel about business conditions, the job market and the next six months, has been recovering fitfully since hitting an all-time low of 25.3 in February 2009.

April’s reading is still far from what’s considered healthy. A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth. Still, the monthly survey of consumers showed that consumers’ current and short-term concerns about jobs and the overall economy are easing.

One component of the overall index, which assesses how consumers feel now about the economy, rose to 28.6 in April from 25.2 in March. The other component, which measures shoppers’ outlook over the next six months, climbed to 77.4 from 70.4.

“Looking ahead, continued job growth will be key in sustaining positive momentum,” said Lynn Franco, director for The Conference Board Consumer Research Center.

Economists believe confidence will remain relatively weak for at least another year because companies haven’t begun to dramatically ramp up hiring.

Contributing: Associated Press

This entry was posted on Tuesday, April 27th, 2010 at 10:19 am and is filed under Real Estate Related. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.