U.S. house prices tumbled nearly 19 percent in February, but for the first time since October 2007 the decline was not a record, suggesting the housing market might be closer to a bottom.
The Standard & Poor's/Case-Shiller Home Price Indices on Tuesday showed prices of single-family homes fell 18.6 percent in February from a year earlier.
Still, the data offers a glimmer of hope, Torsten Slok, senior economist at Deutsche Bank in New York, said.
We are beginning to see green shoots in the housing market.
The housing market is in its worst crisis since the Great Depression as a huge supply of unsold homes, tighter lending standards and record foreclosures push down prices.
The sector affects nearly the entire economy, from the construction industry to the sale of appliances and furniture, and was at the root of the global financial crisis. A continued deterioration in housing could prolong a turnaround by the world's largest economy, in recession since late 2007.
Many potential home buyers have been staying sidelined, waiting for the precipitous drop in prices to be over and for the economy to stabilize.
Slok said the principal factor weighing on home prices is foreclosures.
We are hoping that Obama's housing plan will dampen foreclosures in 2009, but it is still too early to evaluate the effects of the plan, he said.
The composite index of 20 metropolitan areas fell 2.2 percent in February from January, S&P said. The month-over-month drop was slightly sharper than expectations based on a Reuters survey of economists, but the year-over-year change was better than expected. The 20-city index dates back to 2000.
S&P said its index of 10 metropolitan areas declined 2.1 percent in February from January for an 18.8 percent year-over-year drop. The 10-city index dates back to 1988.
For the first time in 16 months, the annual decline of the 10-city and 20-city composites did not set a record.
While the declines in residential real estate continued into February, we witnessed some deceleration in the rate of decline in some of the markets, David M. Blitzer of Standard & Poor's said.
All 20 metro areas recorded a monthly decline in February, but 16 of the 20 saw an improvement in their monthly returns compared to January, Blitzer said.
Of the 20 metro areas, all recorded price drops on a month-on-month and year-on-year basis. Ten areas showed record rates of annual decline. Fifteen areas reported declines in excess of 10 percent versus February 2008, the statement said.
Compared with the mid-2006 peaks, the 10-city index is down 31.6 percent and the 20-city index is down 30.7 percent. As of February, average home prices across the United States are at levels seen in the third quarter of 2003.
Economists believe the housing market will not begin to recover until home prices fall far enough to stimulate demand, which has emerged in some states, such as California.
The three worst performing cities were Phoenix down 35.2 percent, Las Vegas off 31.7 percent and San Francisco down 31.0 percent.
Dallas, Denver and Boston fared the best, with annual declines of 4.5 percent, 5.7 percent and 7.2 percent, respectively.
Looking at the data from the peak through February, Dallas has suffered the least, down 11.1 percent from its peak in June 2007; while Phoenix is down 50.8 percent from its peak in June of 2006.
New York, buoyed by plentiful jobs and big bonuses in the financial sector in recent years, showed a more modest annual decline of 10.2 percent.
Home prices in New York, however, are vulnerable, with rampant financial sector layoffs expected to take a toll on real estate.
(Editing by Kenneth Barry)