Home prices in 20 U.S. metropolitan areas fell at a faster pace in May, and consumer confidence stayed this month near the lowest level since 1992, posing a threat to household spending.
The S&P/Case-Shiller home-price index dropped 15.8 percent from a year earlier, the biggest decline since records began in 2001, after falling 15.2 percent in April. The Conference Board’s confidence index rose to 51.9, from 51 in June.
Home prices have fallen every month since January last year, eroding household wealth at a time when consumers are trying to cope with record fuel costs and the credit crunch.
Sales Headwinds
Stricter loan rules, rising mortgage rates and an increase in foreclosures are making it more difficult for prospective buyers to get financing, hurting home sales. The prolonged real- estate slump, along with higher fuel prices and a shrinking job market, is weighing on consumers and the economy.
Home prices decreased 0.9 percent in May from the prior month after declining 1 percent in April, the report showed. The figures aren’t adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month to month.
The index was forecast to fall 16 percent from a year earlier, after a previously reported 15.3 percent drop in the 12 months ended in April, according to the median forecast of 25 economists surveyed by Bloomberg News. Estimates ranged from declines of 14.8 percent to 17 percent.
Year-End Forecast
“We’re going to see continued declines in house prices, much more so in problem areas,” said Mickey Levy, chief economist at Bank of America Corp. in an interview with Bloomberg Television in New York. “By year-end, the inventories will be low enough, particularly in new homes, that we’ll begin to see light at the end of the tunnel.”
“Regional patterns stand out,” David Blitzer, chairman of the index committee at S&P, said in a statement. The areas that once boomed, such as Miami and Las Vegas, are now showing the biggest declines, he said. Areas in the Midwest, including Detroit and Cleveland, are showing signs of economic stress, according to Blitzer.
Price Measures
The pickup in the pace of house-price decreases from last year contrasts with other private and government measures that indicated values were declining at a slower pace.
The median price of existing houses fell 6.1 percent in June from the same month last year, compared with an 8.5 percent decrease registered in the 12 months ended in April, according a report from the National Association of Realtors last week.
Prices of new homes, as reported by the Commerce Department, dropped 2 percent last month from June 2007. In the year ended in March, the decrease was 13 percent, the biggest in almost four decades.
Residential construction companies are struggling to stay profitable. Pulte Homes Inc., the third-largest U.S. homebuilder, reported a second-quarter loss of $158.4 million last week.
“We see no immediate signs of this housing downturn relenting,” Pulte Chief Executive Officer Richard Dugas said in a conference call with analysts.
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