Home prices level off, raise recovery fears

A steady rise in home prices moderated in October, according to a price index released Tuesday, raising some concerns that the housing market's recovery might face a setback.

The Standard & Poor's/Case-Shiller index, which tracks 20 major metropolitan areas, showed that prices of single-family homes were flat on a nonseasonally adjusted basis from September to October. They rose 0.4 percent on a seasonally adjusted basis.

"We're not seeing a great deal of recovery in home prices," said Mark Vitner, senior economist at Wells Fargo Securities. "What may happen is that prices will plow along the bottom for a year or two."

Nonseasonally adjusted prices rose in only six of the 20 metro areas: Los Angeles, Phoenix, Portland, San Diego, San Francisco and Seattle. Prices were up more than 1 percent in Phoenix and San Francisco, which reported seven consecutive months of positive returns.

But prices are 7.3 percent lower than they were at the same time last year. The steepest month-to-month declines were in Tampa and Chicago, where prices dropped 1.6 percent and 1 percent, respectively. The largest year-over-year drop was in Las Vegas, where prices plunged 26.6 percent.

The housing market's demise in recent years helped cripple the economy. Getting it back on track is critical to a broader recovery, which is why so many federal resources have targeted housing, including a Federal Reserve program that helped push down interest rates and a lucrative tax credit designed to energize buyers.

These programs appear to have stimulated sales and helped stabilize home prices recently. The Case-Shiller index climbed for five consecutive months prior to October. But Vitner said he's concerned that the federal intervention, including efforts that encourage lenders to modify mortgages, "have distorted prices somewhat and put off harsh adjustments that will be necessary for housing prices to find a bottom."

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