Home Prices Still Improving but at a Moderating Pace Entering the Fourth Quarter of 2009, According to the S&P/Case-Shiller Home Price Indices

NEW YORK, NY-- Dec.29, 2009 – Data through October 2009, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the annual rate of decline of the 10-City and 20-City Composites improved compared to last month’s reading.

This marks approximately nine months of improved readings in these statistics, beginning in early 2009.
The chart below depicts the annual returns of the 10-City and 20-City Composite Home Price Indices, declining 6.4% and 7.3%, respectively, in October compared to the same month last year. All 20 metro areas and both Composites showed an improvement in the annual rates of decline with October’s readings compared to September.

“The turn-around in home prices seen in the Spring and Summer has faded with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year-over-year basis. All in all, this report should be described as flat.” says David M. Blitzer (top right photo) Chairman of the Index Committee at Standard & Poor’s.

“Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip.

"Before jumping to conclusions, recognize that the one time that happened at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today.

"Further, sales of existing homes – those included in the S&P/Case-Shiller Home Price Indices – have been very strong in recent months, working off the inventories of houses for sale. At the same time, housing starts remain weak, fears that the market will be swamped by a wave of foreclosures are heard and government programs aimed at the housing market will expire in the first half of 2010.

The chart above shows the index levels for the 10-City and 20-City Composite Indices. As of October 2009, average home prices across the United States are at similar levels to where they were in the autumn of 2003.

From the peak in the second quarter of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. With the relative improvement of the past few months, the peak-to-date figures through October 2009 are -29.8% and -29.0%, respectively.

San Francisco has reported seven consecutive months of positive returns, San Diego has reported six and Los Angeles and Phoenix are close behind with five.

While the two Composites were flat, seven of the MSAs reported positive monthly returns for October and two of those -- Phoenix and San Francisco -- were greater than +1.0%.

Looking at the annual statistics, both Minneapolis and Portland are no longer reporting double-digit declines. Denver and Dallas are nearing positive territory with their annual figures at -0.1% and -0.6%, respectively.

Las Vegas remains the one market that has not seen a glimmer of hope so far this year.

Prices have declined for 38 consecutive months, with a peak-to-trough reading of -55.4%. It is now barely 5% above its January 2000 level. This compares to its peak in August 2006, when the average home price was 135% above that same level.

For more information, please contact::
David Blitzer, 212 438 3907, david_blitzer@standardandpoors.com
David Guarino, 1 212 438 1471, dave_guarino@standardandpoors.com