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Catherine Ngai/MEDILL

Although the house price index was positive for the first time in February compared to last year, Chicago's annual price index fell 3 percent.


U.S. home prices strengthen although monthly percentage change falls

by Catherine Ngai
April 27, 2010


U.S. home prices strengthened in February for the first time since December 2006, according to a report Tuesday. However, the monthly percentage change was lower than in January.

Standard & Poor’s Case-Shiller Home Price Indices, a leading measure of U.S. home prices, tracks sales of homes in the largest U.S. metropolitans such as Chicago, New York and San Francisco.

Despite the positive movement, Chicago saw a 3 percent year-over-year price decline and for the fifth time, experienced a month-over-month decline. San Diego was the only city that saw a positive change from the prior month.  

Although the numbers elicited mixed opinions, some analysts think that it’s a start.

“It’s a little like someone recovering from the flu,” said Tom Bothen, associate director of the center for urban real estate at the University of Illinois at Chicago. “The temperature is going down, but they’re not healthy yet. It’s going to take probably several quarters and several more monthly reports before we really know the significance of these numbers.”

U.S. stock futures fell after one of the measures failed to meet expectations by economists surveyed by Bloomberg News. Economists forecasted a 1.3 percent increase, although the index fell by 0.85 percent from January.

“The recovery of the economy and the recovery of value in the home market are completely, integrally related. They’re related as a function of jobs. We still have relatively high unemployment, and it’s going to take…something between two to five years to reabsorb the jobs we loss in this recession,” Bothen said.

The downward trend in housing prices is apparent. Yet, the trend shows a disparity among different cities. Las Vegas experienced the greatest year-over-year change with home prices falling 14.6 percent. San Francisco, at the other extreme, experienced an 11.9 percent increase from last year.

On the municipal level, housing-policy organizations and advocacy groups are working hard to provide residents with affordable housing that is located both close to jobs and transportation.

“We’re still in a time when a lot of communities and individual families are struggling with the economic situation and mortgages,” said Samantha DeKoven, a housing consultant for Metropolitan Housing Council in Chicago. “There are still a lot of foreclosures out there to be expected.

With the annual change in home prices on the upswing, analysts are hesitant to predict that this could translate at the macro level.

“As the supply begins to be diminished, then home prices seem to be recovering,” Bothen said.

The report also shows that foreclosure activity is at the highest level in the last five years. Some are looking towards the financial reform bill being debated in Congress to change that.

“I think the discussions going on right now in Washington are very much related to how governments can be supportive and regulate, not stifle, so that the housing market can continue to thrive and recover. The place we were at is not sustainable.” DeKoven said.