NEW YORK (Reuters) - U.S. home prices unexpectedly slipped in December but the annual rate of decline slowed, reinforcing the housing market’s rocky road to recovery, Standard & Poor’s/Case-Shiller indexes showed on Tuesday.
KEY POINTS: * The S&P composite index of home prices in 20 metropolitan areas declined 0.2 percent in December, matching the dip in November, for a 3.1 percent annual drop. * A Reuters survey had forecast that prices would be unchanged for the month and down 3.2 percent annually. * The S&P/Case-Shiller U.S. national home price index, which covers all nine census divisions, fell 2.5 percent in the fourth quarter from the same time a year earlier. This measure, like the 20-city and 10-city indexes, have seen smaller annual declines all through 2009. * On a seasonally adjusted basis, the 20-city index rose 0.3 percent in December, S&P said, matching the November increase.
GARY THAYER, CHIEF MACROSTRATEGIST, WELLS FARGO ADVISORS, ST.
“The Case-Shiller numbers were encouraging. It’s the seventh monthly increase in the 20-city monthly average. It’s a good indicator that the housing market is no longer a drag on the economy.”
DAVID DIETZE, CHIEF INVESTMENT STRATEGIST, POINT VIEW FINANCIAL
“I am not sure it is having a great deal of effect because we’re waiting for more data at 10 a.m. which is going to be a little bit more timely.
“But it seems the home price index disappointed just a little bit because we’re seeing continued pressure on stocks, continued pressure on commodities. It seemed like it fell just a tad short of expectations, which probably is some positive news in the Treasury market. They’re of course going to need some positive news because they just have an overwhelming amount of supply.”
TONY CRESCENZI, MARKET STRATEGIST, PORTFOLIO MANAGER, PACIFIC
“It’s not all that surprising given what we’ve seen with new home inventories.
“Because home construction is likely to stay low relative to population growth, we could see this stability for a while. And, it’s also one of the factors that has helped stabilize the markets in general.”
PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:
“December was a month of a near sales vacuum. Home sales fell 16.7 percent because of the expiration of the tax credit program and still you have prices improving on the same trend as they had for a number of months. Buyers were not forced to cave in on prices.”
PETER JANKOVSKIS, CO-CHIEF INVESTMENT OFFICER, OAKBROOK
“It is disappointing. The market is looking for a bottom there. I seem to remember seeing those numbers a couple of months back and it looked like they had ticked up a little bit, but continuing to move lower. That may be somewhat weather related. The tough weather we’ve experienced, particularly on the East Coast, keeps people out. I know it’s hurt general retail sales and it may have made played a role in these home price numbers as well.
“It’s not much of a miss, it’s pretty clear that it’s flat now, it’s not tumbling anymore, so that is a positive. The market probably would get a boost if we were to start to see it moving back uphill and an increase. It’s probably another month or two away from that.”
OMER ESINER, SENIOR MARKET ANALYST, TRAVELEX GLOBAL BUSINESS
“The initial reaction was pretty muted in the dollar. The data, however, is somewhat disappointing. It’s the second straight monthly decline in the Case-Shiller (index). So on balance, I think it might be generally negative for risk appetite and on the margin positive for the dollar. I don’t think the market is going to really focus too much on this data. We get consumer confidence at 10 a.m., which might be more of a pertinent set of data and then of course (Ben) Bernanke tomorrow and Thursday.”
WILLIAM LARKIN, PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT,
“Case-Shiller looked fairly in line with expectations. We seem to have hit a little bit of a trend line in the middle section here. If you look at the chart we were starting to improve and now are finding some resistance. A lot of that has to do with the financing that’s ending. The stimulus for the first time homebuyers is getting a little stale.
“Going forward, as they end that quantitative easing and as
we do start to see interest rates rise, this is the year of the huge amount of ARM (adjustable rate mortgage) resets. This will be the test year. The housing market faces the affordability factor if interest rates do rise, because it’s widely expected in the next 24 months we have to come off this bottom of zero interest rates and the housing market is especially vulnerable to how quickly this change happens.
“Treasuries have shown very little reaction to the data.”
“This number sounds to me on the surface like it’s not going to be a (stock) market-moving event. I think the market has been watching (home prices), and assuming the worst is over, and that we’re in a slow, bottoming process in terms of the housing situation — that it will improve gradually and slowly. It sound like this number will not change that perspective.”
“Looks like it came a little short of expectations but it’s still a dramatic improvement from last quarter. The rate of home price declines decelerated dramatically.
“For the recovery, home price stability is important because so much of household wealth is tied up in the home and we’re more likely to get faster consumer spending growth if housing is stable.
“The Fed is no longer as worried about housing... we have already seen a recovery in sales and we’ve begun to see a decline in inventory and now we’re starting to see price stability as well.
“The bond market investors are reserving judgment on housing until the Fed’s mortgage purchase program ends in March.”
“My expectation was for it to be lower, and it means we’re entering into the second phase of the workout of residential housing. Many of the secondary markets, which were away from the center of the initial problem, are starting to feel the effects of the crisis. We still have a very high foreclosure rate and a high inventory held by banks, along with previously-foreclosed houses and abandoned properties.
“What’s also having an influence is that the full force of government programs set up to help the market was felt in 2009. The influence of the programs is waning in 2010, and the consumer is still weighed down by high unemployment and slow growth in payroll. While affordability has improved, confidence about outlook has not, so there’s hesitancy to move on purchases.”
MARKET REACTION: STOCKS: U.S. stock index futures maintained losses. BONDS: U.S. Treasury debt prices cut gains. DOLLAR: U.S. dollar was little changed.