Home prices in 20 U.S. cities probably fell at a slower pace in the year to January, another sign of stabilization in the residential real estate market, economists said before a report today. Property values are steadying as an improving job market helps underpin home sales, allowing the industry that precipitated the last recession to contribute to growth this year. Nonetheless, the recovery in housing may be restrained by foreclosures that are putting more properties onto the market.
The S&P/Case-Shiller index of property values in 20 cities dropped 3.8 percent from January 2011, the smallest decline in three months, after decreasing 4 percent in the previous 12 months, according to the median forecast of 32 economists surveyed by Bloomberg News.Consumer confidence in March fell as gas prices climbed, another report may show.
“We’re seeing some signs of stabilization in the housing market,” “Better employment is one of the things that is absolutely essential for housing activity to improve. We’re starting to see that.”
Employment growth and rising incomes have made Americans more optimistic, which may spur demand and help stabilize prices. In February, the unemployment rate held at a three-year low of 8.3 percent, while payroll gains capped the best six- month run since 2006, according to Labor Department figures.
Builders have become more upbeat about the housing market. The National Association of Home Builders/Wells Fargo sentiment index in March held at the highest level since June 2007 as the sales outlook climbed for a sixth straight month.
Builder shares have improved as the market stabilized. The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders including Ryland Group Inc. and Lennar Corp. has climbed 24 percent since the end of last year, compared with a 13 percent increase for the broader S&P 500 Index.
Fed Chairman Ben S. Bernanke yesterday said that while he’s encouraged by the decline in unemployment, the central bank still needs to keep interest rates low to make further progress.
Recent “better news” on the economy has also included a “slight bit of encouraging news here and there in the housing market” and strength in manufacturing, Bernanke said in response to audience questions following a speech in Arlington, Virginia.
Still, higher gas prices are weighing on household sentiment. The price of a gallon of regular unleaded gas was $3.90 on March 25, up 62 cents since the end of last year, according to AAA, the nation’s largest automobile association. Paying more at the pump may limit consumer spending on other items.
“Consumer sentiment today is mixed with decent job news, but that’s offset certainly by a spike up in gas and food prices,” Clarence Otis, chairman and chief executive officer of the Orlando, Florida-based firm, said on a March 23 conference call. “If you look at today’s environment across the industry, it is somewhat weaker than it was during the holiday and immediate post-holiday period.”