Home prices in January remained barely above lows hit during the worst of the recession, according to an index that tracks prices in America's biggest cities, and many analysts said they expected values to fall further as the housing downturn plumbs new depths.
The Standard & Poor's/Case-Shiller index for 20 major U.S. cities, released Tuesday, showed prices dropped 3.1% from January 2010 and 1% from December as demand for homes remained weak and distressed properties — foreclosures and short sales — remained a large part of the market.
"Keeping with the trends set in late 2010, January brings us weakening home prices with no real hope in sight for the near future," said David M. Blitzer, chairman of the index committee at Standard & Poor's. "The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery."
The 20-city index is 1.1% above its low hit in April 2009. A second index, tracking prices in 10 major cities, remained 2.8% above its April 2009 bottom. Many economists expect these widely watched indexes to dip below those previous benchmarks this year, marking a double dip in housing values as defined by Standard & Poor's/Case-Shiller.
"The double-dip should happen by June," Patrick Newport, U.S. economist with IHS Global Insight, wrote in a note Tuesday. "Going forward, weak demand, foreclosures and a glut of homes for sale should translate into at least another 5% drop in the Case-Shiller composite indices."
Other than San Diego and Washington, all of the major cities tracked by the index posted year-over-year declines. San Diego was up 0.1% and Washington rose 3.6%. Los Angeles fell 1.8% and San Francisco slipped 1.7%.
On a month-over-month basis, every city but Washington declined when left unadjusted for seasonal variations. Los Angeles fell 0.6%, San Diego 1.2% and San Francisco 1.9%.
The index doesn't include parts of California such as the hard-hit Inland Empire or the Central Valley, where more homes than needed were built, foreclosures remain a dominant part of the market and the economy is considerably worse off.
Out of the 20 cities measured by the index, 11 posted new lows since home prices peaked. The same cities had all hit new lows the month prior. Those cities were Atlanta; Chicago; Detroit; Las Vegas; Miami; New York; Phoenix; Seattle; Charlotte, N.C.; Portland, Ore.; and Tampa, Fla.
A recovery in housing prices seemed to be on track last year. But those gains were largely fueled by federal home-buying tax credits that expired last summer, analysts said.
"By definition, a government stimulus program borrows from the future to support the now," Dan Greenhaus, chief economic strategist for investment firm Miller Tabak & Co. wrote in a note. "Unfortunately for this particular program in this particular industry, it is increasingly clear that there was almost no future demand to borrow from."