U.S. home prices fall 2.6% in March, S&P/Case-Shiller index shows

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Home prices ended the first quarter at their lowest point since the U.S. housing crisis began, a closely followed index of home values showed, but analysts found indications of growing stability in the turbulent housing market.

Home prices in 20 major cities fell 2.6% in March compared with the same month a year earlier, according to the Standard & Poor’s/Case-Shiller index. The gauge is down about 35% from its peak before the housing bubble burst in 2006.

The decline is “disappointing,” said David Blitzer, chairman of S&P’s index committee.

But the pace of the slump is the slowest since December 2010. In February, the 20-city composite dropped 3.5%.

Home values in 13 cities dipped year-over-year, according to the report released Tuesday. In California, values slid 4.8% in Los Angeles, nearly 3% in San Francisco and 2.7% in San Diego.

Atlanta suffered an 18% plunge, reaching new lows along with Chicago, Las Vegas, New York and Portland, Ore. That’s an improvement, however, from the nine cities that reported fresh lows in February, as measured by the index.

And most large U.S. cities — 12 of the 20, led by Phoenix, Seattle and Dallas — saw home prices rise in March from February.

A separate national home price index released quarterly by S&P that covers the entire U.S. and not just major metropolitan areas fell 1.9% in the first quarter compared with the same period in 2011.

“The housing situation in the United States, while certainly not booming, is seeing some stability and possibly some gains,” Blitzer said in a conference call with reporters.

The S&P/Case-Shiller index, created by economists Karl E. Case and Robert J. Shiller, is widely considered the most reliable indicator of home values. The measure 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.

Other recent reports have shown rising sales of existing and new homes, housing starts, permits and builder confidence. Vacancy and foreclosure rates have declined; mortgage rates are at record lows.

But they are figures “you want to take with a grain of salt,” Case said. “They look good, but they’re not great relative to history.”

Because the Case-Shiller index measures prices across three months, “it might be the last of the closely followed home price figures to reflect a turning point,” Credit Suisse analyst Jonathan Basile wrote in a note to clients.

Indeed, Case-Shiller’s March numbers don’t reflect some recent improvements, said Richard Green, chairman of the USC Lusk Center for Real Estate.

“In the two months since then I have seen a lot of evidence that the market is getting better,” he said.

Inventories of unsold homes are declining in many cities, and the average time a house spends on the market is shrinking. Houses in California priced under $500,000 on average sell within three months.

There also is anecdotal evidence of improvement in Southern California, Green said.

“I’m hearing stories of multiple offers for houses; that hasn’t happened in a while,” he said. “Brokers are just happier than they have been in a long, long time.”

Foreclosures in Los Angeles County decreased 2.52% in March from a year earlier, CoreLogic said Tuesday. That was below the national average of a 3.41% decline. But about 22% of the nation’s homeowners with mortgages were underwater, owing more on their loans than their properties were worth.

“Add to this the currently high unemployment and underemployment rates, and tight credit conditions, one gets a recipe for further price declines,” economists Patrick Newport and Michelle Valverde of IHS Global Insight said in a note.

“Our view is that foreclosures, excess supply and weak demand will drive home prices as measured by the Case-Shiller indices down a bit further, but that a bottom is in sight.”