April 27, 2010
By DAVID STREITFELD, New York Times
Housing prices recorded their first annual increase in more than three years in February, but there was little cause for celebration as the monthly number again showed a decline.
The Standard & Poor’s Case-Shiller Home Price Index, a widely watched indicator, was up 0.6 percent in February from February 2009, data released Tuesday show. The last time the index showed an annual increase was in December 2006, just as prices were beginning their long slide.
The current trend is once again down, however, with last year’s strong summer and fall yielding to a weak winter.
Prices dropped 0.9 percent in February from the previous month. It was the fifth consecutive monthly decline and the largest since last March when measured in numbers not adjusted for seasonal variations.
S.& P. announced last week that the unadjusted numbers were a more reliable indicator than its seasonally adjusted numbers, a break with the company’s past preference for treating both data sets equally. In recent months, the two indexes have diverged, with the adjusted numbers showing the market was modestly improving and the unadjusted numbers showing it was modestly declining.
In explaining its new preference for the unadjusted numbers, the Case-Shiller Home Price Index Committee said that the housing market crash had generated “unusual movements that are easily mistaken for shifts in the normal seasonal patterns.” These movements, which include an abundance of foreclosures, have resulted in “misleading results,” the committee said.
Karl E. Case, a member of the committee and the co-developer of the index, said, “The thing that spooked us is that the seasonal component got bigger. We found ourselves with this number we didn’t quite understand.”
The best way to measure the strength of housing, the committee now says, is on an annual basis.
By that measure, housing was barely holding its own in the year ending in February. Eleven of the 20 cities declined during the period. Las Vegas performed the worst, dropping 14.6 percent, followed by Tampa, Seattle and Detroit. The best performer was San Francisco, up 11.9 percent, followed by San Diego and Los Angeles. New York City was down 4.1 percent for the year.
The health of the housing market is difficult to determine. The government has poured more than a trillion dollars of stimulus into real estate, but that support is now beginning to taper off. A tax credit for buyers expires this week. That stimulated sales in March and this month, and probably helped prices as well. But it is likely to weaken the market this summer.
If the credit had any effect on prices this winter, it was minimal. Nineteen of the 20 cities in the index, excepting only San Diego, fell in February from January on an unadjusted basis.
Other housing indexes mirror the weak Case-Shiller numbers.
The government’s housing price index, released last week, fell 0.2 percent in February on an adjusted basis to a new low for this cycle.
Compiled by the Federal Housing Finance Agency, the index uses data from mortgages that have been sold to or guaranteed by the government-controlled mortgage holding companies, Fannie Mae and Freddie Mac. It tends to be less volatile than other indexes.
Another index, compiled by First American CoreLogic, dropped 2 percent in February from January. That drop followed a 1.6 percent decline from December to January.
The First American index is not seasonally adjusted, which probably means that the traditionally weak winter market may be pushing the numbers down.
First American projected this week that house prices would decline 3 to 4 percent over the next year, assuming there is not yet another round of stimulus.
“The administration has made a policy of putting a floor under home prices, and they succeeded,” a First American analyst, Sam Khater, said. Over the next year, he said, “the floor will be removed and home prices will decline to a more organic level that is not artificially supported.”