Housing prices up less than projected
Home prices in 20 U.S. cities rose at a slower pace than forecast in August from a year earlier, reflecting slumping sales as the effects of a tax credit waned.
The S&P/Case-Shiller index of property values increased 1.7 percent from August 2009, the smallest year-over-year gain since February, the group said Tuesday. The median forecast of economists surveyed by Bloomberg projected a 2.1 percent increase.
The end of a government credit worth as much as $8,000 precipitated a decrease in purchases that has yet to be reversed, keeping pressure on prices in coming months. At the same time, a record number of foreclosures is expected to dump more properties on the market and unemployment will restrain sales.
"Prices are declining in line with the widening imbalances between housing demand and supply, and we can expect this trend to continue," said Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research. "Home prices are likely to decline, probably on a choppy basis, through at least the middle of next year."
Meanwhile, confidence among U.S. consumers rose in October from a seven-month low, another report showed, indicating the biggest part of the economy will take time to recover.
The Conference Board's confidence index increased to 50.2 from a revised 48.6 in September, while the proportion of people who said jobs were plentiful fell to the lowest level this year and income expectations were the weakest since April 2009.
In addition to unemployment, concern over deteriorating property values may also be weighing on Americans' psyche.
The Case-Shiller index showed that prices dropped year-over-year in 12 of the 20 cities. Las Vegas showed the biggest 12-month drop at 4.5 percent, while San Francisco had the biggest increase at 7.8 percent. Prices in the Washington region rose 4.8 percent from August 2009.
"A disappointing report," David Blitzer, chairman on the index committee at S&P, said in a statement. "It does not seem that any of the markets are hanging on to the temporary momentum caused by the homebuyers' tax credits."
Federal Reserve officials have signaled they may begin another round of unconventional monetary easing at their next meeting Nov. 3 to try to spur the economic recovery.
Housing markets were "weak," with "sluggish or declining" sales in many regions, the Fed said last week in its survey of regional economic activity for September and early October.
"Respondents' outlooks suggested sales and construction would remain subdued through year-end," the Fed said.