April Sales Improving—

Home Prices Drop

A Record 14.1 Percent

NEW YORK (AP) — What do you want first, the good news or the bad news?

While US home prices dropped at the sharpest rate in two decades during the first quarter, indicating that the housing slump continues to deepen, sales of new homes rose in April for the first time in six months — although the unexpected increase still left activity near the lowest level in 17 years.

Standard & Poor’s/Case-Shiller said its national home price index fell 14.1 percent in the first quarter compared with a year earlier, the lowest since its inception in 1988. The quarterly index covers all nine US Census divisions.

Prices nationwide are at levels not seen since the third quarter of 2004, according to Maureen Maitland, a S&P vice president. However, the index is still up 60 percent versus 2000.

The narrower indices also set record declines in the first quarter. The 20-city index tumbled 14.4 percent, the lowest since that index was started in 2001. The 10-city index plunged 15.3 percent, a record in its 20-year history.

“There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path,” said David Blitzer, chairman of S&P’s index committee.

Nineteen of the 20 metro areas reported annual declines, with 15 of them posting record lows. Six metro areas lost more than 20 percent.

Las Vegas had the worst quarterly performance, falling 25.9 percent, followed by Miami and Phoenix. Only Charlotte, N.C., stayed above water, gaining less than 1 percent over the previous year.

Last week, the Office of Federal Housing Enterprise Oversight said home prices fell 3.1 percent in the first quarter, the largest drop in its 17-year history and only the second quarter of price declines recorded.

The OFHEO index is narrower in scope and is calculated using mortgages of $417,000 or less that are bought or backed by Fannie Mae or Freddie Mac. That excludes properties bought with some of the riskier types of home loans.

Real estate professionals grappling for any shred of positive trending may find some relief in a Commerce Department report May 27 that indicated sales of new homes rose 3.3 percent in April to a seasonally adjusted annual rate of 526,000 units.

But, at the same time, the government revised March activity lower to show an even bigger drop of 11 percent to an annual rate of 509,000, which was the weakest pace for sales since April 1991.

Economists believe that new home sales will remain weak for some time as the housing industry struggles with falling prices and rising mortgage foreclosures, which are dumping even more homes on an already glutted market.

The Commerce report showed that the median price of a new home sold in April dropped to $246,100 in April, down 4.2 percent from April 2007.

A separate report showed home prices falling during the first three months of this year at the sharpest rate in two decades. The Standard & Poor’s/Case-Shiller index fell 14.1 percent in the first quarter compared with a year earlier, the biggest year-over-year decline since the index began in 1988.

The Commerce report on new home sales showed the April rebound was led by a huge 41.7 percent surge in sales in the Northeast. Sales were up 8.3 percent in the West and 5.8 percent in the Midwest. The only region which saw a decline in sales in April was the South, where sales fell by 2.4 percent.

The inventory of unsold new homes edged down slightly to 10.6 months’ supply at the April sales pace, compared with 11.1 months in March. However, the April level was still about double the inventory level that was normal during the five-year housing boom.

That boom ended in 2005 and since that time the housing industry has been struggling in a tough environment with falling sales and prices and rising mortgage defaults.

Economists believe that home prices will remain under pressure until the sizable level of inventories is worked down to more manageable levels. Many analysts do not expect to see a rebound in prices until sometime next year.