Home prices dropped more than forecast in October, a sign housing will remain a weak link as the U.S. recovery accelerates into the new year.
The S&P/Case-Shiller index of property values fell 0.8 percent from October 2009, the biggest year-over-year decline since December 2009, the group said today in New York. The decrease exceeded the 0.2 percent drop projected by the median forecast of economists surveyed by Bloomberg News.
A wave of foreclosures waiting to reach the market means home prices will remain under pressure in 2011, representing a risk to household finances. Federal Reserve policy makers this month said “depressed” housing and high unemployment remained constraints on consumer spending, reasons why they reiterated a plan to expand record monetary stimulus.
“We’ll remain in negative territory for several more months,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, who forecast a year-on-year drop of 1.3 percent. “The housing market does remain weak and none of the recent data suggest a substantial pickup.”
U.S. single-family home prices fell for a fourth straight month in October pressured by a supply glut, home foreclosures and high unemployment, data from a closely watched survey showed on Tuesday.
The Standard & Poor’s/Case-Shiller composite index of 20 metropolitan areas declined 1.0 percent in October from September on a seasonally adjusted basis, a much steeper drop than the 0.6 percent fall expected by economists.
The decline built on a revised decrease of 1.0 percent in September and took prices down 0.8 percent from year-ago levels. It was the first year-on-year drop in the index since January.
The housing market has been struggling since home buyer tax credits expired earlier this year. To take advantage of the tax credits, buyers had to sign purchase contracts by April 30.
“The (housing) double dip is almost here, as six cities set new lows for the period since 2006 peaks. There is no good news in October’s report,” said David Blitzer, chairman of the index committee at S&P.
Eighteen of the 20 cities showed weaker year-on-year readings in October and all 20 cities showed monthly price declines.