Falling home prices stir fears of new bottom

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NEW YORK --- The housing slump isn't over.

Tax credits and historically low mortgage rates have failed to lift home prices so far this year. Prices fell 0.5 percent in March from February, according to the Standard & Poor's/Case-Shiller 20-city index released Tuesday.

That marks six consecutive months of declines -- a sign the housing market is going in reverse.

"It looks a little like a double-dip already," economist Robert Shiller said. "There is a very real possibility of some more decline."

The co-creator of the Case-Shiller index, who predicted in 2005 that the housing bubble would burst, says he worries that home prices rose last year only because of the federal tax credits.

That fear is shared by other economists, who note that weak job growth, tight credit and millions of foreclosures ahead will weigh on the home market.

That is discouraging for homeowners who have seen the value of their largest asset deteriorate over the past three years.

Falling home prices tend to curtail consumer spending, and they make it harder for struggling borrowers to refinance into an affordable home loan.

Prices in 13 of the 20 cities tracked by the index fell, and only six recorded gains. One, Boston, came in flat.

In the first quarter of 2010, U.S. home prices fell 3.2 percent from the fourth quarter.

The numbers are especially disturbing because they show improved sales from the tax credits didn't translate into higher prices, said David M. Blitzer, the chairman of the S&P index committee.

In a better economy, extraordinarily low mortgage rates would pump up demand for homes, but employers aren't creating new jobs fast enough and loans are harder to come by for small businesses and individuals.

On Monday, the National Association of Realtors said sales of previously occupied homes rose 7.6 percent in April. The sales were aided by government incentives that have now expired. Economists don't expect the improvements to last.

New buyers were offered a credit worth up to $8,000. Current owners who bought and moved into another home could get a credit for up to $6,500.

To receive them, buyers had to have a signed offer by April 30 and must close by the end of June.

Shiller and other economists worry that prices could fall below the levels of April 2009, which was the lowest point since the peak in July 2006.

Watching the numbers

THE NUMBERS: Home prices fell 0.5 percent in March from February, according to the Standard & Poor's/Case-Shiller 20-city index released Tuesday. That marked the sixth consecutive month of declines.

BREAKING IT DOWN: Thirteen of the 20 cities tracked by the index showed declines in March. Six recorded gains and one, Boston, was flat.

WHAT'S AHEAD: Now that tax credits have expired, economists fear weak job growth, tight credit and millions more foreclosures will weigh on the market.


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