Home Prices Slip Again, and Some Markets Hit New Lows

Home prices declined slightly in January from last year, but the pace of the price declines has slowed, according to S&P/Case-Shiller's Home Price Indices, a monthly report that monitors residential home prices in 20 metro areas across the U.S.

Economists expected the S&P composite index of all 20 metro area prices to slip 0.8% in January, on a seasonally adjusted basis, according to a Reuters survey. Home prices actually fell 0.7% from January last year, according to the index.

Some markets took much harder hits than others, though. While home prices in San Francisco and Minneapolis increased 12.9% and 15.2% respectively from their lows, cities with overbuilding and less robust economies got slammed. Charlotte, Las Vegas, Seattle and Tampa, for example, all hit new lows relative to the current housing cycle.

Meanwhile, Washington D.C. and New York City are among the markets that have held up best through the whole crisis: Home prices in both cities are 70% above 2000 levels.

Mixed Report

"The report is mixed," said David Blitzer, chairman of the index committee at S&P, in a prepared statement. "While we continue to see improvements in the year-over-year data for all 20 cities, the rebound in housing prices seen last fall is fading. Fewer cities experienced month-to-month gains in January than in December 2009, on both a seasonally adjusted and unadjusted basis."

Before the report was released, stock futures climbed, partly based on hope that the report would show slowing price declines, and after market open the Dow Jones Industrial Average edged up.

Although parts of the report were encouraging, there's much evidence that the housing market is nowhere near a full recovery. Roughly 250,000 U.S. households became 90-days delinquent on their mortgage payments in the fourth quarter, and borrowers who have received government relief are still having a hard time staying afloat.

Part of the problem lies in unemployment and joblessness -- it's difficult for unemployed homeowners to pay mortgages when they have no income. President Barack Obama's recently announced changes to the federally-funded Making Home Affordable program is meant to address that issue by providing temporary relief to unemployed borrowers. However, it's still not clear whether mortgage relief is the most effective solution, given that so many borrowers with modified loans still end up defaulting.