April 24 (Bloomberg) -- Home prices in 20 U.S. cities dropped at a slower pace in the year ended February, pointing to stabilization in the real-estate market.
The S&P/Case-Shiller index of property values fell 3.5 percent from a year earlier, the smallest 12-month drop since February 2011, a report from the group showed today in New York. The median forecast of economists surveyed by Bloomberg News projected a 3.4 percent fall. The index climbed from the prior month on a seasonally adjusted basis for the first time since April of last year.
Steadying home values are needed to lay the groundwork for a sustained rebound in the housing industry by giving prospective buyers confidence. Near record-low borrowing costs and more hiring may help the market absorb the foreclosures still in the pipeline, which may mean housing will no longer hinder economic growth.
“Mortgage rates are very, very low, but you really need to see strong job growth,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “It’s still a very long way to go before we get a full recovery.”
Stock-index futures were little changed after the report. The contract on the Standard & Poor’s 500 Index maturing in June was at 1,363.4 at 9:21 a.m. in New York, up less that 0.1 percent from yesterday’s close.
The 31 economists’ estimates for the year-over-year change in the home price index for February ranged from declines of 3 percent to 3.8 percent, according to the survey. The Case- Shiller index is based on a three-month average, which means the February data were influenced by transactions in December and January.
The group revised the reading in the year ended January to show a 3.9 percent decrease from a previously estimated 3.8 percent drop.
Home prices adjusted for seasonal variations increased 0.2 percent in February from the prior month, following a drop of 0.1 percent in January. Unadjusted prices fell 0.8 percent from the prior month, pushing the index down to the lowest level since October 2002. Nine of the 20 cities also registered post- boom lows, the report said.
The year-over-year gauge, begun in 2001, provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
Fifteen of the 20 cities in the index showed a year-over- year decline, led by a 17 percent plunge in Atlanta, a record for the city. Phoenix showed the biggest increase, with prices rising 3.3 percent in February.
Recent reports indicate builders are still trying to gain their footing. The National Association of Home Builders/Wells Fargo sentiment index in April fell to a three-month low as a measure of sales expectations for the next six months declined.
Sales of previously owned houses fell in March for the third time in the past four months. Purchases dropped 2.6 percent to a 4.48 million annual rate from 4.6 million in February, the National Association of Realtors said on April 19.
Even so, low borrowing costs and better job prospects should support demand. The average rate on a 30-year fixed mortgage reached an all-time low of 3.87 percent in February and was little changed at 3.90 percent in the week ended April 19, according to data from Freddie Mac.
Buyers “are starting to feel pressure not to miss this moment,” Lennar Corp. Chief Executive Officer Stuart Miller said during a March 27 conference call with analysts. “The fully- loaded cost of ownership is lower in the most-desirable markets than comparable rental rates.”
Other data on housing this week may show signs of improvement in the industry. Pending home sales probably rose 1 percent in March after a 0.5 percent decline the previous month, according to the median estimate in a Bloomberg survey ahead of an April 26 report from the National Association of Realtors.