Home prices in U.S. down third month

WASHINGTON - U.S. home prices dipped in January for a third straight month, likely because of slower sales in recent months caused by winter weather, a limited supply of homes and higher mortgage rates.

The Standard & Poor’s/Case-Shiller 20-city home price index, released Tuesday, declined 0.1 percent from December to January, the same drop as the previous two months. That figure is not adjusted for seasonal variations, so the dip partly reflects weaker winter sales.

Most economists aren’t concerned about the moderation in price gains. Home prices jumped over the past two years as very low mortgage rates pushed up sales. Meanwhile, the supply of available homes remained tight. Many homeowners couldn’t sell because they owed more on their mortgages than their houses were worth.

Meanwhile, investors swooped in and bid up prices in places such as Las Vegas, Phoenix and other cities in the South and West.

“The home price appreciation we’ve been seeing is unsustainable,” said Stan Humphries, chief economist for real estate data provider Zillow. “It needs to moderate over time or we risk inflating another housing bubble.”

The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three month moving average. The January figures are the latest available.

Twelve cities reported price declines in January from the previous month. The biggest decline was in Chicago, where home prices dropped 1.2 percent, followed by Seattle, where prices fell 0.8 percent.

Las Vegas reported the biggest price gain, up 1.1 percent, followed by Miami, with 0.7 percent.

Compared with a year earlier, New York and Washington, D.C., posted their largest gains since 2006, just before the housing bubble burst.

The slowdown in price gains comes after other signs that the housing recovery has hit a rough spot. Sales of previously owned homes in February fell to their lowest level since July 2012. And home construction slipped for the third month in a row, though builders sought the most permits in February than in any month in four years.

The Commerce Department said Tuesday that fewer people bought new U.S. homes in February. Sales fell to their slowest pace in five months, a sign that the housing market has yet to recover fully from brutal winter weather.

Sales of new homes declined 3.3 percent last month to a seasonally adjusted annual rate of 440,000. That was down from a revised rate of 455,000 in January.

Buying dropped off during February in the Northeast, which was battered by snowstorms. It also fell in Western states, where last year’s price increases have made homes less affordable.

Arkansas home sales climbed 8.7 percent in January compared with January last year, the Arkansas Realtors Association said.

There were 1,595 homes sold in the 43-county area that reports to the association, up from 1,467 a year earlier. The sales include existing homes and new-home construction. The average sales price for a house in the state was $145,423 in January, up about 1 percent from January last year.

Nationally, mortgage rates are roughly a full percentage point higher than they were last spring, although they remain low by historical standards. The average rate on the 30-year loan is 4.32 percent, mortgage buyer Freddie Mac said last week, down from 4.37 percent the previous week.

Most economists expect home sales and prices to rise this year, particularly as the weather improves, but at a slower pace.

Humphries expects home prices will appreciate 3.4 percent this year, roughly in line with historical averages. Zillow’s home price index rose 5.6 percent in February from a year earlier.

Some economists say the Case-Shiller figures overstate recent price gains because they include foreclosures. Foreclosed homes usually sell at steep discounts. As the proportion of those sales declines, the index rises more sharply.

A third economic report released Tuesday said consumer confidence climbed in March to the highest level since 2008.

The Conference Board’s index increased to 82.3 this month, exceeding all estimates in a Bloomberg survey of economists and was the highest since January 2008, from78.3 in February, the New York based private research group said.

The share of Americans predicting business conditions would get better over the next six months rose to the highest level since September. A pickup in hiring that drives wage growth would provide a bigger boost to the expansion at the same time warmer temperatures help persuade consumers to return to retailers.

“Consumers spend based on their expectations, and not based on their current levels of income, and consumer expectations were at a very healthy level this month,” said Guy LeBas, managing director of fixed income strategy at Janney Montgomery Scott LLC in Philadelphia. “Job growth is stable, the memory of global financial crisis and losses on mortgages is pushing further into the past, and we’ve avoided so far this year many of the fiscal debates that damaged confidence.” Information for this article was contributed by Christopher S. Rugaber and Josh Boak of The Associated Press and Katherine Peralta of Bloomberg News.

Business, Pages 25 on 03/26/2014

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