From the WSJ:
Home prices fell to fresh lows in December, but economists say that a drop in the number of homes listed for sale could help stabilize prices in parts of the country this year.
Home prices fell by 4% last year, according to the Standard & Poor’s/Case-Shiller index that tracks 20 metro areas. Prices dropped by 1.1% for the three-month period ending in December compared with the same period ending in November.That was slightly better than November’s reading, when prices were down 1.3% from October.
Tuesday’s report is the latest evidence that the housing market still faces a cloudy outlook after a six-year downturn. The inventory of homes for sale has contracted, reducing competition among sellers, according to The Wall Street Journal’s quarterly survey of housing-market conditions in 28 metro areas.
But a large potential backlog of foreclosed properties hangs over many housing markets. Other headwinds including tight mortgage-lending standards that show few signs of easing.
“These are times of continued, great uncertainty about home prices,” said Robert Shiller, the Yale University economist who co-founded the index that bears his name. “We might be on the verge of a home recovery, but then, maybe not.”
Others are becoming somewhat optimistic. Thomas Lawler, an independent housing economist in Leesburg, Va., said the S&P/Case-Shiller index should hit a bottom this spring. He said many analysts have overlooked positive developments, including a dearth of new construction and the falling share of homes selling out of foreclosure.
At the current sales rate, it would take about four months to sell the supply of homes on the market in Denver, Washington, D.C., and Orange County, Calif. That level is lower, at less than three months, in Phoenix and San Francisco, and has dropped to just 1.9 months in Sacramento, Calif., according to figures compiled by John Burns Real Estate Consulting.
“The TV and the papers make it seem like there’s a ton of houses out there, but it’s been a shock to us,” said Andy Rysdam, 24, who is looking to buy his first home in Phoenix. He said he isn’t worried about buying and then seeing prices tumble “because it doesn’t seem like they can go much lower.”
But several markets still face supply-demand imbalances that could keep pressure on prices. New York’s Long Island had a 13-month supply of homes at the end of the fourth quarter. Nashville and Charlotte, N.C., had a 12-month supply, and northern New Jersey had a nearly 11-month supply.
Those numbers will rise if banks sell more foreclosed properties as they correct deficient mortgage-handling practices.