LV homes again lead nation in price drop

WASHINGTON -- Once again, Las Vegas leads the nation -- in annual home price decreases.

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.

The largest year-over-year drop was in Las Vegas, where prices plunged 26.6 percent.

"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."

Separately, consumers' expectations for the job market over the next six months reached their highest level in two years, but Americans remain gloomy about their current prospects.

The Conference Board said its Consumer Confidence Index rose to 52.9, up from a revised 50.6 in November, but the reading is still far short of the 90 that would signify a solid economy. In October, consumer confidence was 48.7.

Economists surveyed by Thomson Reuters predicted a reading of 52 for December.

The index, which hit a historic low of 25.3 in February, enjoyed a three-month climb from March through May, fueled by signs that the economy might be stabilizing. The road has been bumpier since June as unemployment has risen.

In housing, 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 (1.5 percent) and Chicago (1 percent).

Las Vegas-based Home Builders Research reported a median resale price of $126,000 in November, a decrease of $47,900, or 27.6 percent, from the same month a year ago. However, the price increased by $1,000 from the previous month and has bounced around $125,000 for six months.

This year will be remembered for 90,000 job losses in Las Vegas and 2010 will be remembered as the "survival" year, said Dennis Smith, president of Home Builders Research. The "recovery" year for the home-building industry might not come until 2012, he said.

"It is reality, folks. The market will get better, but it will take many months," Smith said.

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 had risen for five consecutive months before 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."

In a statement Tuesday, David Blitzer, chairman of the S&P home-price index committee, said the October results are "likely to spark worries that home prices are about to take a second dip."

But he said that has only happened once before, at the start of the 1980s, under very different circumstances, and that the dramatic reversals in Fed policy back then contrast with today's stable and consistent approach. Another positive sign is that sales of existing homes have been climbing and their excess supply has been shrinking, he said.

But "housing starts remain weak, fears that the market will be swamped by a wave of foreclosures are heard and government programs aimed at the housing market will expire in the first half of 2010," Blitzer said.

All of those factors can affect home prices. The situation looks even more dire if unemployment numbers keep swelling and related delinquencies and foreclosures are considered. Foreclosures tend to drag down prices.

Many analysts also say they are also bracing for lenders to resume sales of foreclosed homes. Many lenders had temporarily halted foreclosure sales as they waited to learn more about new government-led modification programs aimed at helping distressed borrowers.

Smith said the "shadow inventory" of homes being held by banks has been "over-hyped." Realtors were told it was going to hit the market in the spring, then in July, then again in October.

They're still waiting.

"We're not suggesting that it does not exist," Smith said. "It is pretty obvious that the big banks are still holding huge numbers of homes that have been or are yet to be foreclosed. It still suggests to us that they don't have the staff or the training to handle that flood of product hitting the market."

Economists also are closely tracking a round of adjustable-rate mortgages that will reset, possibly to much higher rates. Many of those loans are held by credit-worthy prime borrowers as well as people who took out nontraditional loans that did not require verification of income.

Review-Journal writer Hubble Smith contributed to this report.