Pace of US housing downturn abates - Prices start to rebound in some areas

Pace of US housing downturn abates - Prices start to rebound in some areas
By Sarah O’Connor in Washington
Copyright The Financial Times Limited 2009
Published: June 30 2009 15:31 | Last updated: June 30 2009 15:31
http://www.ft.com/cms/s/0/c9dd6ac0-657e-11de-8e34-00144feabdc0.html


The pace of the US housing downturn abated in April and house prices started to rebound in some areas, supporting hopes that the worst of the crash is over.

House prices in 20 metropolitan areas fell 0.6 per cent month-on-month in April, according to the S&P Case-Shiller home-price index, following a 2.2 per cent decline a month earlier.

Prices were still 18.1 per cent lower than they were a year ago, in a sign of how savaged the housing market has been during this recession. Economists, however, were expecting a worse figure of 18.6 per cent.

“While one month’s data cannot determine if a turnaround has begun, it seems that some stabilisation may be appearing in some of the regions,” said David Blitzer, chairman of the S&P index committee. He said that people were beginning to feel more confident about the economy, which was encouraging them to buy homes. However, he warned that the spring and summer are traditionally stronger months for house prices, “so it will take some time to determine if a recovery is really here.”

Eight of the 20 areas recorded rising prices, including Dallas, Washington DC, San Francisco and Boston. Areas where prices were bumped up by speculative buying during the bubble years remained the hardest hit, such as Phoenix, Miami and Las Vegas.

The housing market has been at the epicentre of the US recession as collapsing prices kicked off a wave of defaults on parcels of mortgage debt held by banks. The Case-Schiller index has fallen by almost a third since the peak of the market in mid-2006, and many believe prices must stop falling before a broader economic recovery can begin.

”Things are bottoming,” said John Silvia, chief economist at Wachovia. “For ten to 15 of these cities, things will be positive in another month or two…Housing is going to be less of a drag on the economy but it won’t adding to it as it traditionally does.”

Some economists were more pessimistic. “We are not seeing any rebound or resurgence brewing in the housing market,” said Ken Flanagan, fixed income strategist at Morgan Stanley. “In housing, the worst is behind us, but it is an awfully deep hole we will have to climb our way out of.”