House prices hit post-bubble low; Seattle area sees slight increase

While home prices in most cities dropped to new post-bubble lows in March, prices in the Seattle metropolitan area actually rose a hair, according to a closely watched index.

Prices in King, Snohomish and Pierce counties inched up 0.1 percent from February, according to the Standard & Poor's/Case-Shiller index. Of the 20 big cities the index tracks, Washington, D.C., was the only other metropolitan area where prices rose.

But prices in a dozen markets reached their lowest points since the housing crisis began. And the nationwide index fell for the eighth straight month.

Prices have now fallen further since the bubble burst than they did during the Great Depression. It took 19 years for the housing market to regain its losses after the Depression ended.

Prices rose last summer, fueled by a temporary federal home-buying tax credit. But they've plunged since then. This month's report marked a "double dip in home prices across much of the nation," said David Blitzer, chairman of the Index Committee at Standard & Poor's.

Many economists think prices nationally will drop at least 5 percent more by year's end. They aren't likely to stop falling until the glut of foreclosures for sale is reduced, employers start hiring in greater force, banks ease lending rules and would-be buyers regain confidence that a home purchase is a wise investment.

"Folks are having so much difficulty in getting financing for a home," said Mark Vitner, senior economist at Wells Fargo. "It may be early next year before prices hit bottom."

Another obstacle to a rebound in prices: a delay in processing foreclosures. Homes in foreclosure sell for, on average, 20 percent discounts. When they do, they pull prices down further. But many foreclosure sales have been delayed while federal regulators, state attorneys general and banks review how those foreclosures were carried out over the past two years.

Once those homes are eventually foreclosed upon, they will trigger a further price drop in many markets. Those declines are "etched in stone," said Patrick Newport, U.S. economist at IHS Global Insight.

The 12 cities now at their lowest levels in nearly four years are: Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland and Tampa.

Minneapolis fared the worst in March; prices there fell 3.7 percent. They dropped 2.4 percent in Charlotte and Chicago and 2 percent in Detroit.

The Seattle metropolitan area's tiny increase came after seven straight months of declines. Despite the March gain, home prices here have dropped 7.5 percent from a year ago, more than double the national rate.

The Case-Shiller index measures sales of select homes in the 20 largest markets compared with January 2000. For each metro area it reviews, the index provides a three-month moving average price. By measuring sales prices of the same homes over time, the index seeks to pinpoint market values and conditions.

The housing sector is struggling even as the overall economy is in the midst of a steady but slow recovery.

That won't change soon. Roughly 92 percent of homeowners say it's a bad time to sell their home, according to the latest Thomson Reuters/University of Michigan index of consumer sentiment.

Some of the sharpest price declines have occurred in cities hit hardest by unemployment and foreclosures, such as Phoenix, Tampa and Las Vegas. .

But the damage is now spreading to areas that had long escaped the worst of the crisis. They include Dallas, Denver, Minneapolis and Cleveland. Economists regard them as housing bellwethers — metro areas that are reliable indicators of where national prices are headed.

Denver and Dallas are on pace to hit post-housing bust lows in the next few months.