Home prices still falling at record pace in first quarter

WASHINGTON (MarketWatch) -- U.S. home prices fell a record 19.1% in the first quarter compared with a year earlier, according to the national Case-Shiller home price index released Tuesday.

On a month-to-month basis, prices in 20 selected cities fell 2.2% in March and were down 18.7% in the past year.

"We see no evidence that a recovery in home prices has begun," said David Blitzer, chairman of the index committee for Standard & Poor's, which compiles the Case-Shiller index.

The continued declines in the Case-Shiller index are at odds with a similar price index published by the Federal Housing Finance Agency, which has increased the past two months. The FHFA index uses only conforming loans written or guaranteed by Fannie Mae and Freddie Mac.

In recent months, single-family housing starts, new-home sales and existing home sales appear to be stabilizing at very low levels. But some analysts are skeptical that the housing market has bottomed.

"We can cheer all the data under the sun but until prices stabilize, I imagine that no sustainable gain in the pace of sales will be seen," wrote Dan Greenhaus, equity strategist for Miller Tabak & Co. With inventories still very high, "downward pressure on home prices should continue for the foreseeable future."

Falling home values have helped to plunge the global economy into chaos because financial institutions made too many bad bets that U.S. home prices would never fall. Homeowners have lost trillions of dollars of wealth.

With prices still falling at a rapid pace, millions of homeowners are finding themselves owing more on their house than it is worth. They cannot sell for what they owe, and they cannot refinance their loan. They cannot borrow against their home to finance their consumption.

Seventeen of 20 cities saw prices fall in March, with record declines in Minneapolis, Detroit and New York. Prices rose 0.3% in Charlotte and 0.1% in Denver. Prices were flat in Dallas.

Prices in all 20 cities have fallen significantly in the past year. Prices in the best market -- Denver -- are down 5.5%. Prices in three cities -- Phoenix, Las Vegas and San Francisco -- are down 30% or more in the past year.

From the peak, home prices are down 32.2%, and on average are at the same level they were at in late 2002. From their peak, prices are down more than 50% in Las Vegas and Phoenix.

The Case-Shiller index tracks repeat sales on the same properties over time, but it closely tracks only 20 cities, not the whole country.
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