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After increasing last summer, U.S. home prices are drifting lower again -- a disconcerting development for property owners who had hoped that the real estate market had finally bottomed out.
The S&P Case-Shiller home price report, which was released Tuesday, showed that the U.S. National Home Price Index increased 2 percent in the first quarter from the same period a year earlier on a non-seasonally adjusted basis. (
"The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices," Standard & Poor's Index Committee Chairman David Blitzer said in a statement. "In the past several months we have seen some relatively weak reports across many of the markets we cover. Thirteen MSAs and the two Composites saw their prices drop in March over February."
The recent slide in home prices has taken place amid favorable housing market conditions. Real estate prices have fallen sharply from the peaks reached during the housing boom, making a home purchase more affordable to a wider swath of potential buyers. At the same time, 30-year fixed mortgage rates averaged an attractive 4.97 percent for the month of March. Even the labor market showed signs of stabilization, adding more than 160,000 new jobs in March. These forces -- in addition to a tax perk from Uncle Sam -- helped increase sales of previously-owned homes in March by nearly 7 percent from the previous month. "It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices," Blitzer said.
Mike Larson of
Still, Ian Shepherdson, an economist at
Meanwhile, Patrick Newport of IHS Global Insight says the inventory overhang will prevent prices from hitting bottom until sometime next year. "In our view, the housing glut and foreclosures will drive the national Case-Shiller index down another 6-8%, with prices bottoming in 2011," he said in a report.