Case Shiller Index: Home Prices Down Despite Incentives

If you were looking for good news about the housing market, you're in the wrong week. After yesterday's depressing data about April's rising inventories, the S&P Case Shiller Home Price Index today released its influential price index for March.

The highlight (or rather low point): Prices of single-family homes fell 0.5 percent from February, which is the sixth month-on-month drop after what felt like a mini-recovery last fall. This is especially worrisome since prices should have seen some kind of a boost from record low mortgage rates and Obama's home-buyer tax-credit which expired in April.

But they didn't.

So what does this mean for home buyers and sellers?
Celia Chen, housing specialist at Moody's, told HousingWatch that the weakness is inevitable, considering the volume of distressed homes that have been flooding the market.

"Foreclosures are going to have a fairly negative impact on the housing market through the beginning of next year," she predicts, adding that housing prices could drop another 5 percent between now and the end of the year.

The chairman of Standard & Poor's index committee, David Blitzer, agrees. He calls it "especially disappointing" that the improvement in volumes of home sales and new construction in March didn't boost prices. Now that the tax incentive has expired, he says, forget about seeing any growth in demand.

There's some good news to be gleaned, though. The long-term recovery still seems to be inching forward: National prices were up 2.3 percent from last year.

Some cities are slowly working through their foreclosure mess:'s Chen points out that San Diego and San Francisco, which posted the strongest gains in Case Shiller's 20-City Index -- 1.5 percent each -- are also cities that reduced the total share of foreclosures in their inventory.

By contrast, Las Vegas is still in free fall, with prices off 0.8 percent from February and down a stunning 12 percent from last year, while Detroit lost 4.1 percent on the month and 4.6 percent on the year.

As the Economist puts its succinctly: "Four years after the housing boom reached its apex and the bust began, an end to the mess remains just out of reach."

So if you're looking to buy, the upside is within view. And if you're looking to sell, hang in there -- prices may stabilize soon. If you're in Las Vegas or Detroit, hold on to your hat.
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