(Updates with economist comment in fourth paragraph.)
Sept. 27 (Bloomberg) -- Home prices in the U.S. declined less than forecast in July from a year earlier, a sign bank delays in processing foreclosures may have temporarily slowed the slump in real-estate values.
The S&P/Case-Shiller index of property values in 20 cities fell 4.1 percent from July 2010, after a revised 4.4 percent drop in the 12 months to June, the group said today in New York. The median forecast of 28 economists surveyed by Bloomberg News projected a 4.4 percent decline. Values were little changed in July from the prior month after adjusting for seasonal changes, the same as in June.
Investigations into bank foreclosure practices led to delays in processing that may have helped stabilize prices in recent months. Values may soon resume their slide as the holdups dissipate, putting more houses on to the market and pushing back any recovery in the industry that precipitated the last recession.
“The enormous supply overhang of existing homes, particularly factoring in all those in foreclosure or soon to be, promises to keep pressure on prices for some time,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said in a note to clients. “We look for further declines to be registered in the quarters ahead, although in all likelihood the rate of deterioration will be nowhere near as steep as that recorded earlier.”
Stock-index futures held earlier gains following the report on optimism European leaders will solve the region’s debt crisis. The contract on the Standard & Poor’s 500 Index expiring in December rose 1.8 percent to 1,179.6 at 9:27 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 1.99 percent from 1.90 percent late yesterday.
Estimates for the price change from July 2010 ranged from declines of 4 percent to 5.5 percent, according to the Bloomberg survey. The Case-Shiller measure is based on a three-month average, which means the July data were influenced by transactions in June and May. July’s year-to-year drop was the smallest since March.
Prices in the 20 cities rose 0.9 before adjusting for seasonal changes in July after climbing 1.2 percent in June.
“This is still a seasonal period of stronger demand for houses, so monthly price increases are expected,” David Blitzer, chairman of the S&P index committee, said in a statement. “We are still far from a sustained recovery.”
Combined with data showing a drop in housing starts, an increase in sales of existing homes, fewer defaults and a plunge in consumer confidence, these data “indicate that the housing market is still bottoming and has not turned around,” said Blitzer.
The year-over-year gauge provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.
Eighteen of the 20 cities in the index showed a year-over- year decline in July, led by a 9.1 percent drop in Minneapolis.
The only gainers were Detroit, which showed a 1.2 percent advance, and Washington, with a 0.3 percent increase.
Home sales remain in the doldrums. Purchases of new houses fell in August to a six month low, figures from the Commerce Department showed yesterday. Purchases of previously owned homes rose to a five-month high, boosted by demand of low-priced, distressed houses, the National Association of Realtors said Sept. 21. Sales of existing properties have averaged a 4.97 million annual pace this year, compared with the 7.25 million peak reached in September 2005.
“The U.S. housing market remains under stress,” Frank Blake, chairman and chief executive officer at Home Depot Inc., the biggest home-improvement retailer, said on an Aug. 16 teleconference with analysts. “We do not expect any meaningful improvement in the housing market for the back half of 2011, and events here and across the globe would suggest that there are more risks to the downside than the upside.”
More distressed properties may soon come on the market, adding to the pressure on prices. Default notices sent to delinquent U.S. homeowners surged 33 percent in August from the previous month, a sign that lenders are speeding up the foreclosure process after almost a year of delays, RealtyTrac Inc. said Sept. 15.
Fed policy makers last week announced more steps to spur growth and revive the residential real estate industry, which since 1982 has aided every economic recovery except the current one. In a move aimed at lowering borrowing costs, the Fed said it will buy $400 billion of bonds with maturities of six to 30 years through June, while selling an equal amount of debt maturing in three years or less.
The central bank said it will also reinvest maturing mortgage debt into mortgage-backed securities instead of Treasuries in an attempt to spur housing and refinancing.
“There are significant downside risks to the economic outlook, including strains in global financial markets,” the Fed said in a statement on Sept. 21 after its two-day meeting. “The housing sector remains depressed,” and there is “continuing weakness in overall labor market conditions.”
--Editors: Carlos Torres, Christopher Wellisz
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