The pace of U.S. home price declines slowed in July, suggesting the housing market is approaching its bottom, according to a widely followed index released Tuesday.
Prices of homes in 20 metropolitan areas dropped 13.3% in July compared with the same month a year earlier, according to the S&P;/Case-Shiller U.S. national home price index. In June, it had posted a 15.4% annual decline. The index’s year-over-year declines have been slowing since January, after falling at a record pace for 16 straight months.
July’s 20-city home price index also was higher than June’s, the second consecutive monthly price gain when adjusted for seasonality.
“These figures continue to support an indication of stabilization in national real estate values,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s.
“But we do need to be cautious in coming months to assess whether the housing market will weather the expiration of the federal first-time buyer’s tax credit in November, anticipated higher unemployment rates and a possible increase in foreclosures,” Blitzer said.
However, the index’s co-founder, Wellesley College economist Karl E. Case, said the index’s relatively strong performance justified ending the $8,000 federal tax credit.
“We’ve got to phase back incentives, and this may be a good time to do that,” he said in a Bloomberg Radio interview.
In the Los Angeles area, which includes Orange County, July home prices were down 14.9% from a year earlier. The most extreme year-to-year price drops were in Las Vegas (31.4%), Phoenix (28.5%) and Detroit (24.6%).
The 20-city index is 32.6% below its mid-2006 peak. The Los Angeles area index is down 40% from its September 2006 peak. Las Vegas has had the most severe crash -- its July prices were 54.8% below their July 2006 peak.
The 20-city index is now at 2003 levels, reverting to a level just before home prices made their most dramatic gains during the housing bubble. Three areas -- Cleveland, Dallas and Denver -- in July showed annual declines of less than 3%.
The index compares the latest sales of detached houses with previous sales and accounts for factors such as remodeling that might affect a house’s sale price over time. From those data, an index score is used to show price changes. An index score of 100 reflects January 2000 prices.