In a good sign for many homeowners, last year home prices in some metro areas saw a bit of improvement – or at least a slower rate of decline.
According to the S&P/Case-Shiller Home Price Indices, the top-performing city in terms of home prices in 2009 was San Francisco. There, prices went up 4.8 percent. No. 2 in the indices was Dallas, with a 3 percent gain, and San Diego came in third, with a price increase of 2.7 percent.
Case-Shiller measures home prices in 20 metropolitan areas. In a national index, it recorded a 2.5 percent price drop. This was partly because of some steeply falling markets. For example, for 2009, Las Vegas was down 20.6 percent, and Tampa, Fla., fell 11 percent.
Between November and December, 15 of the 20 metro areas saw prices fall. But for the first time in more than three years, Las Vegas prices rose slightly. Also, the California markets of Los Angeles, San Francisco, and San Diego continued to show some signs of recovery.
Despite these bright spots at the end of last year, the prices in some cities – including Charlotte, N.C.; Seattle; and Tampa – continued to fall. In fact, the prices in these three cities hit new low index levels as measured over the past four years.
Some of the negative December numbers probably reflected an anticipated expiration of the federal tax credit for first-time home buyers. The tax credit helped drive demand in October and November but was scheduled to expire at year-end.
However, on Nov. 24, Congress extended and expanded the credit until the end of this April.
“Realistically, the extension didn’t happen soon enough to affect sales in the month of December,” says economist Richard DeKaser of Woodley Park Research in Washington, who is an expert on home prices.
The improvement in Las Vegas, where prices rose 0.9 percent between November and December on a seasonally adjusted basis, is “kind of surprising,” Mr. DeKaser says. The Las Vegas market, he notes, “is among the most overbuilt housing markets in America.”
Housing-market analysts are divided over whether prices will continue to stabilize or increase. DeKaser notes that home prices as of the fourth quarter of last year were the most affordable in 40 years.
However, Patrick Newport, an economist with IHS Global Insight in Lexington, Mass., says in an analysis that forces are growing to bring home prices back down. He cites the coming expiration of the first-time home-buyer tax credit, the record level of homes on the market, and the high level of foreclosures, which he thinks will increase.
“Our view is that despite the recent positive reports on housing prices, prices have further to fall – about another 5 percent,” he writes.