(Bloomberg News) Home prices decreased in the year ended April by the most in 17 months, showing the housing market remains an obstacle for the U.S. recovery.
The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from April 2010, the biggest drop since November 2009, the group said today in New York. From March to April, prices fell 0.1 percent on a seasonally adjusted basis, the smallest decline since July 2010.
A backlog of foreclosures and falling sales raise the risk that prices will decline further, discouraging builders from taking on new projects. The drop in property values and a jobless rate hovering around 9 percent are holding back consumer sentiment and spending, which accounts for 70 percent of the economy.
"Home prices are still easing but the declines are not dramatic any more," said Harm Bandholz, chief U.S. economist at Unicredit Group in New York, who correctly predicted the year- over-year drop. While month to month changes show "prices have basically bottomed and are moving sideways," he said "we're a long way away from significant increases in house prices."
Consumer confidence unexpectedly fell in June to a seven- month low, indicating that slowing employment gains are weighing on Americans' outlooks, another report today showed. The Conference Board's index decreased to 58.5 from a revised 61.7 reading in May that was higher than previously estimated. The percent of respondents expecting an increase in job availability fell to the lowest in 11 months.
Shares Rise
Stocks held earlier gains after the report amid optimism that a deal can be reached to help Greece avoid defaulting on its debt. The Standard & Poor's 500 Index climbed 0.6 percent to 1,288.35 at 9:45 a.m. in New York. Treasury securities fell, pushing the yield on the benchmark 10-year note up to 2.95 percent from 2.93 percent late yesterday.
The decrease matched the median forecast of 30 economists surveyed by Bloomberg News. Estimates ranged from declines of 4.9 percent to 3.5 percent. The year-over-year drop in March was revised to 3.8 percent from a previously reported 3.6 percent decline.
Before adjusting for seasonal variations, prices climbed 0.7 percent from March, today's report showed.
The year-over-year gauge 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.
Shiller's Outlook
Shiller told a conference in New York this month that a further decline in property values of 10 percent to 25 percent in the next five years "wouldn't surprise me at all."