Case-Shiller: U.S. home price index rises for fourth month, but not in Seattle

WASHINGTON — The summer's trend of rising home prices is ebbing as the traditional home-shopping season ends. The Standard & Poor's/Case-Shiller home price index of 20 major cities rose 0.3 percent to 144.96 in September, the fourth monthly increase in a row. The seasonally adjusted index is now up more than 3 percent from its bottom in May, but still 30 percent below its peak in April 2006.

The upward trend has bypassed Seattle, however, where the index dropped 0.3 percent in September, to 147.08, the lowest reading since April 2005.

All scores were of 100 in January 2000.

Nationally, analysts expect prices to dip again this winter as foreclosures increase and economic growth remains modest.

The government said today that the economy grew at a 2.8 percent rate last quarter — less than originally estimated. And forecasts for the next several months are no better. Unemployment, meanwhile, could rise from the current 10.2 percent to as high as 11 percent next year.

"As long as the unemployment rate stays elevated, you're going to see pressure on the pace of foreclosures, which are going to find their way back onto the market, depressing prices," said Dan Greenhaus, chief economic strategist with Miller Tabak & Co.

Home prices are a key ingredient to rebuilding the economy. Homeowners feel wealthier when their property appreciates in value and are more likely to spend money. Rising prices also help millions of homeowners who owe more to the bank than their homes are worth.

Currently, roughly one in four homeowners are in that situation, according to First American CoreLogic. And a record 14 percent of homeowners with a mortgage are either behind on their payments or in foreclosure, data from the Mortgage Bankers Association showed.

That will likely force many consumers to shorten their holiday shopping lists. Americans' confidence in the economy improved slightly in November from October, but shoppers are still gloomy, The Conference Board reported today. While home prices nationally are likely to keep rising through November, "we are very worried about the potential for a huge wave of supply next year, both from private sellers and banks," wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics. "Prices could easily reverse their recent gains."

Home prices rose in 11 major cities, with the strongest gains in San Francisco and Minneapolis, according to the Case-Shiller report. That's a shift from the summer, when price gains were more widespread. In July, for example, prices were up in 17 cities.

In the Seattle-area market, which includes King, Snohomish and Pierce counties, the Case-Shiller index peaked in May 2007 and has dropped every month since. But in most of the nation prices started falling a year earlier, and some experts say Seattle's turnaround may come later as well.

Home prices fell by the most in September in Las Vegas and Cleveland. Compared with a year earlier, the 20-city index was down 9.4 percent, the smallest year-over-year decline since January 2008.

In Seattle, the year-over-year drop was 13.8 percent.

"With housing remaining an albatross around the economy's neck, nothing would perk things up more than some increases in home prices," wrote Joel Naroff, chief economist at Naroff Economic Advisors. "That seems to be happening."

The price reports came a day after the National Association of Realtors said home resales surged by more than 10 percent in October as buyers took advantage of a special tax credit for first-time owners.

The Commerce Department on Wednesday will release new-home sales data for October. Economists expect a 2 percent increase from September to an annualized rate of 410,000, according to Thomson Reuters.

Seattle Times staff reporter Eric Pryne contributed to this report.