Bloomberg News

Home Prices in 20 U.S. Cities Probably Fell at a Slower Rate

November 29, 2011

Nov. 29 (Bloomberg) -- Home prices in 20 U.S. cities probably fell at a slower pace and consumer confidence rose from a two-year low, showing the economy is stabilizing, economists said before reports today.

The S&P/Case-Shiller index of property values in 20 cities dropped 3 percent in September from the same month in 2010 after decreasing 3.8 percent in the year ended August, according to the median forecast of 32 economists surveyed by Bloomberg News. The Conference Board’s confidence gauge climbed to 44 this month from 39.8 in October, separate figures may show.

Unemployment at 9 percent, tight lending standards and a looming supply of distressed properties that may drag down home prices further will probably keep hurting demand into next year. A pickup in employment is needed to boost consumers’ outlooks and lift purchases of big-ticket items.

“Housing demand is still quite weak, things are just not getting worse at the moment,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York. “The economy is just muddling along.”

The S&P/Case-Shiller index, based on a three-month average, is due at 9 a.m. New York time. Survey estimates ranged from declines of 2.7 percent to 3.9 percent.

The New York-based Conference Board’s consumer confidence measure is due at 10 a.m. The Bloomberg survey median was based on 70 estimates that ranged from 37 to 49.6.

Other surveys reflect a lack of optimism. The Bloomberg Consumer Comfort Index stagnated in the week ended Nov. 20 at levels previously reached only at depths of recessions.

At Recession Levels

The Thomson Reuters/University of Michigan index of consumer sentiment was at 64.1 this month, little changed from its average during the 18-month recession that ended in June 2009.

Better job prospects may help brighten consumers’ moods. Nonetheless, the pace of hiring this month probably failed to reduce unemployment, figures this week may show.

Employers boosted payrolls by 120,000 workers in November and the jobless rate held at 9 percent, according to the median forecast of economists surveyed before a Labor Department report on Dec. 2.

Job growth probably needs to pick up to stimulate enough housing sales to reduce inventory and drive values up for a sustained period. The Case-Shiller report will show home prices, after adjusting for seasonal variations, fell 0.1 percent in September from the prior month, according to the survey.

Better Gauge

The year-over-year gauges provide better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Additionally, a pipeline of seized properties threatens to weigh on prices even more. In the third quarter, U.S. lenders started foreclosures on more homes, the first increase in a year, as bank moratoriums that clogged the pipeline dissipated.

“Housing market activity remained very weak,” minutes from the Federal Open Market Committee’s Nov. 1-2 meeting showed last week. “The large overhang of foreclosed and distressed properties along with limited demand in an environment of uncertainty about future home prices and tight underwriting standards for mortgage loans” weighed on the market, it said.

Sliding prices and unemployment have discouraged new housing construction. The Standard & Poor’s Homebuilder Supercomposite Index has slumped 16 percent this year, compared with a 5.2 percent decline for the S&P 500 Index.

“We’re in a market that’s quite fragile,” Ara Hovnanian, chairman and chief executive officer of Hovnanian Enterprises Inc., a Red Bank, New Jersey-based builder, said during a Nov. 9 investor conference. “While delinquency rates have taken a little dip, on the whole, there is nothing that says that foreclosures are going to change dramatically over the near term, however you define that.”

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Vince Golle

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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