Signs of instability in home prices
Of the 20 cities in the Standard & Poors/Case-Shiller Index, fewer than half of them saw prices rise in October compared to a month earlier. Why was the index basically flat after five months of gains? Amy Scott reports.
A sign advertises a reduced price in front of a home for sale in San Anselmo, Calif. (Justin Sullivan/Getty Images)
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Kai Ryssdal: A couple of years ago, while he was still running the Federal Reserve, Alan Greenspan made a speech about the U.S. housing market. And how what we had wasn't necessarily a bubble, it was just a market that had a lot of froth in it. That was his word back then. Now, post-boom, we're trying to detect any kind of lift we can in real estate.
A report out today doesn't offer much good news in that regard. After five months of gains, the Standard and Poors/Case-Shiller index was basically flat. Of the 20 cities in the index, less than half of them saw prices rise in October over a month earlier. Our New York bureau chief Amy Scott has the story.
AMY SCOTT: Each city in the Case-Shiller index tells a different story about the housing market.
Maureen Maitland is vice president of index services at Standard and Poors. She says prices in San Francisco, Los Angeles, and San Diego have been rising for several months.
MAUREEN MAITLAND: The counter to that has been Las Vegas. Las Vegas has been down for more than three years and continues to trade down. It's in fact the one city that hasn't shown any positive movement at all in 2009.
The downturn hit later in Portland and Seattle, so they're still seeing big price drops from a year ago. Overall, though, Maitland says home prices are stabilizing.
Consultant Thomas Lawler credits a slew of government programs, like tax breaks for home buyers, and efforts by the Federal Reserve to keep mortgage rates low.
THOMAS LAWLER: When you add all of that up, that's had an enormous impact on stabilizing the market.
But some of those programs are winding down. And some analysts are expecting a double-dip in home prices.
By the end of March, the Fed plans to stop buying mortgage-backed securities from Fannie Mae and Freddie Mac, which has helped suppress interest rates. The tax credits for homebuyers expire in April.
Stan Humphries is chief economist at Zillow.com, a real-estate Web site. He's predicting at least another three million foreclosures next year.
STAN HUMPHRIES: So a little bit less demand and a lot more supply, because of foreclosures, we think are a recipe for declining prices through the second quarter of next year.
Mortgage rates are already rising. They hit an all-time low of about 4.7 percent a few weeks ago. Freddie Mac predicts they'll reach 6 percent by the end of next year.
In New York, I'm Amy Scott for Marketplace.
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