Home Prices Are Still Falling

The average price of a single-family home in the U.S. fell again in August in the 20 metro areas monitored by the S&P Case-Shiller index of property values.

The average price was down 3.8 percent from August 2010, with only the Detroit, Mich., and Washington, DC metros showing year-over-year growth. Home values were up 2.7 percent in Detroit and 0.3 percent in Washington.

The average home value is now down 31 percent from the 2006 high, when the housing bubble peaked.

News is not all bad

While the year-over-year results continue to be disappointing, the month-to-month showing is somewhat more encouraging. Case-Shiller's Home Price Indices showed increases of +0.2 percent for the 10-and 20-City Composites in August versus July. Ten of the 20 cities covered by the indices also saw home prices increase over the month. In addition, 16 of the 20 Metropolitan Statistical Areas (MSA) and both

Composites posted improved annual returns compared to July’s data.

Los Angeles and Miami saw no change in annual returns in August and Atlanta and Las Vegas saw their annual rates of change fall deeper into negative territory. Still, housing experts see reason to temper expectations.

“There was some weakness in the monthly statistics, as 10 of the cities post price declines in August over July,” said David M. Blitzer, Chairman of the Index Committee at S&P Indices. “And even though the annual rates are largely improving, 18 MSAs and both Composites are still negative. Nationally, home prices are still below where they were a year ago.

Policymakers may be about to act

But finally, policymakers may be poised to do something about it. William Dudley, president of the Federal Reserve Bank of New York, has recently pushed the Fed to address the housing issue, saying it is key to helping the economy recover.

But it's unclear that lower interest rates, by themselves, would do anything to help. After all, rates are at historic lows, hovering just above four percent. Despite the attractive rates, there are few buyers because tighter lending standards mean fewer people can qualify for loans.

The National Association of Realtors (NAR) has repeatedly called for addressing housing as a way to stimulate the economy. NAR chief economist Lawrence Yun has said on many occasions that if lenders would just return to the lending standards that were in place before the housing bubble, home sales would jump 15 percent.

Lenders have not taken that step for a number of reasons, not least of which is a fear that home values have yet to hit bottom.