The Wall Street Journal

30 May 2012

Home Prices Hint at Slow Housing Recovery – Prices Barely Declined From February to March, Stirring Hope for Recovery

Housing prices across the U.S. fell in March, but not as much as in earlier months, according to a report Tuesday that offered fresh evidence of a real-estate market on the mend.

Compared with February, prices fell just 0.03% in March, and after adjusting for seasonal factors, they rose 0.09%, according to the S&P/Case-Shiller 20-city home-price index.

“This is the first flat report we’ve had in quite some time,” said David M. Blitzer, chairman of the Index Committee at S&P Indices. Still, “whil

Housing prices across the U.S. fell in March, but not as much as in earlier months, according to a report Tuesday that offered fresh evidence of a real-estate market on the mend.

Compared with February, prices fell just 0.03% in March, and after adjusting for seasonal factors, they rose 0.09%, according to the S&P/Case-Shiller 20-city home-price index.

“This is the first flat report we’ve had in quite some time,” said David M. Blitzer, chairman of the Index Committee at S&P Indices. Still, “while there has been improvement in some regions, housing prices have not turned” everywhere, he said.

It is a measure of the housing slump’s severity that a flat index in March is seen as good news; prices are down roughly 35% from their peak in 2006.

Five cities—Atlanta, Chicago, Las Vegas, New York and Portland, Ore.—still saw average prices hit new lows since the financial crisis. Home prices in Atlanta fell the most over the year at 17.7%. Phoenix, by contrast, posted a gain of 6.1%, the largest in the index.

Average sale prices of single-family homes declined 1.9% in the first quarter from a year ago, according to the Case-Shiller national composite index. Prices dropped 2% in the first quarter from the fourth quarter of 2011.

The March data raised hopes that the current quarter—the important spring selling season—is luring buyers confident that prices have reached bottom. Last week, the National Association of Realtors reported sales of previously owned homes increased 3.4% in April from a month earlier.

“The worst is over,” said Christopher Mayer, a real-estate professor at Columbia Business School.

Research and forecasting firm Capital Economics echoed that sentiment, saying, “U.S. house prices have now found a floor.”

Indeed, sellers willing to list their homes at prices down sharply from their peak six years ago are finding more offers than they did last year.

Last fall, “nothing moved,” said Jeff Pintar, a Dana Point, Calif., real-estate investor, who resells foreclosed properties that he buys from banks in five Southern California counties. That has changed, he said, with most homes now selling within a week. “The market is stabilizing,” he said. “Prices have continued to fall and fall and fall, but right around December buying activity and renting activity really picked up at a pace we haven’t seen in several years.”

Analysts say that is because of improved economic conditions, including a better job market and looser credit. Seven cities—Dallas, Denver, Detroit, Miami, Minneapolis, Phoenix and Charlotte, N.C.—posted sales growth compared with last year. Still, the Case-Shiller index of 10 major metropolitan areas was down 2.8% in March from a year earlier. The 20-city index was off 2.6%.

Yale University economist Robert Shiller was cautious, pointing to the European crisis and uncertainty about government’s continued role in guaranteeing mortgages. “There is a good chance we’ll be down for a year,” he said. “There is too much uncertainty.”

Consumers seem to share his pessimism. A consumer confidence survey released Tuesday by the Conference Board, a business-research firm, fell to 64.9 in May, a four-month low. It was down from 68.7 in April.

In a conference call to discuss the housing report, economist Karl Case was markedly brighter than Mr. Shiller, with whom he founded the index measuring home prices in a three-month moving average. “This period of postboom malaise has lasted a long time now,” Mr. Case said. “There is nothing but good news since April.”

As home buyers come into the market, some are discovering that the sustained declines of the past five years are giving them an opportunity to buy in places that were once out of reach. “We never really thought we could afford a house in the Bay Area on one income,” said Katie Kirsch, who with her husband, Sean, a member of the Air Force, bought a four-bedroom home in Livermore, Calif., this month.

This year, they put in unsuccessful offers on four other properties in the San Jose area, including one that sold for nearly 18% above its $489,000 asking price. “There aren’t very many homes for sale, and so a lot of them are selling way above the listing price,” Ms. Kirsch said.

They secured the winning offer after writing a letter to the seller. “We feel like we’re the all-American family, and introducing our family would help us get a better look,” Ms. Kirsch said.