Slowing pace of falling home prices offers hope

By Julie Haviv

NEW YORK (Reuters) - U.S. house prices tumbled nearly 19 percent in February, but for the first time since October 2007 the decline was not a record, suggesting the housing market might be closer to a bottom.

The Standard & Poor's/Case-Shiller Home Price Indices on Tuesday showed prices of single-family homes fell 18.6 percent in February from a year earlier.

Still, the data offers a glimmer of hope, Torsten Slok, senior economist at Deutsche Bank in New York, said.

"We are beginning to see green shoots in the housing market."

The housing market is in its worst crisis since the Great Depression as a huge supply of unsold homes, tighter lending standards and record foreclosures push down prices.

The sector affects nearly the entire economy, from the construction industry to the sale of appliances and furniture, and was at the root of the global financial crisis. A continued deterioration in housing could prolong a turnaround by the world's largest economy, in recession since late 2007.

Many potential home buyers have been staying sidelined, waiting for the precipitous drop in prices to be over and for the economy to stabilize.

Slok said the principal factor weighing on home prices is foreclosures.

"We are hoping that Obama's housing plan will dampen foreclosures in 2009, but it is still too early to evaluate the effects of the plan," he said.

The composite index of 20 metropolitan areas fell 2.2 percent in February from January, S&P said. The month-over-month drop was slightly sharper than expectations based on a Reuters survey of economists, but the year-over-year change was better than expected. The 20-city index dates back to 2000.

S&P said its index of 10 metropolitan areas declined 2.1 percent in February from January for an 18.8 percent year-over-year drop. The 10-city index dates back to 1988.

For the first time in 16 months, the annual decline of the 10-city and 20-city composites did not set a record.

"While the declines in residential real estate continued into February, we witnessed some deceleration in the rate of decline in some of the markets," David M. Blitzer of Standard & Poor's said.

All 20 metro areas recorded a monthly decline in February, but 16 of the 20 saw an improvement in their monthly returns compared to January, Blitzer said.

Of the 20 metro areas, all recorded price drops on a month-on-month and year-on-year basis. Ten areas showed record rates of annual decline. Fifteen areas reported declines in excess of 10 percent versus February 2008, the statement said.