Home prices rise, but housing market still faces challenges

Home prices rise, but housing market still faces challenges

By Stephanie Armour and Paul Davidson, USA TODAY

Home prices in major cities rose for a third consecutive month, but declining consumer confidence and a soon-to-expire tax credit for first-time home buyers could reverse the improving trend, economists said Tuesday.

Seasonally adjusted home prices increased in August, following increases in July and June, according to the Standard & Poor's/Case-Shiller 20-city index released Tuesday. Prices rose in 17 of the 20 metro areas, and 14 saw prices jump for the third month in a row.

Overall, prices are up 3% from May. But in most areas, prices are still well below where they were at their peaks in 2006 or 2007.

RISING FORECLOSURES: State-by-state look at 2009 Q3 home foreclosures

CHART: Foreclosure rates for top metro areas in Q3

Meanwhile, the Conference Board reported that consumer confidence fell sharplyin October from September. The fourth decline in the past five months surprised many economists who had forecast a small increase in the closely watched index.

Nearly 50% of consumers told the Conference Board that jobs were hard to get, up from 47% in September.

Wells Fargo economist Mark Vitner calls the report "a wake-up call for those who thought the economy was out of the woods."

The cash-for-clunkers program and the up-to-$8,000 tax credit for first-time home buyers, which expires Nov. 30, boosted the economy last summer even more than anticipated, he says.

Patrick Newport, an economist at IHS Global Insight, says that without the tax credit, prices could fall an additional 5% and hit bottom in 2010.

"If the tax credit isn't extended, the sky's not going to fall, but prices will probably worsen," he says.

Congress is weighing proposals to extend the credit into 2010, as well as broaden it to buyers who already own homes.

Another concern for the housing industry: growing foreclosure rates in some metro areas because of rising unemployment and resets of adjustable-rate mortgages, says RealtyTrac in a report out Wednesday.

Among the top 50 metro areas with the highest foreclosure rates in the third quarter, the three biggest year-over-year increases were in Boise City-Nampa, Idaho, and Salt Lake City and Provo-Orem, Utah.

RealtyTrac's report on third-quarter foreclosure filings in more than 200 metro areas shows Las Vegas had the nation's highest foreclosure rate at 5.13%.

RealtyTrac reported last week that Nevada had the highest foreclosure rate among states.

S&P/Case-Shiller home price index

Metro area	Index Aug. 2009	Change from July	Change from Aug. 2008
Atlanta	111.19	1.0%	-10.6%
Boston	155.95	0.9%	-4.2%
Charlotte	120.72	-0.4%	-8.6%
Chicago	130.55	1.7%	-12.7%
Cleveland	107.42	-0.5%	-2.8%
Dallas	121.44	0.2%	-1.2%
Denver	130.07	1.0%	-1.9%
Detroit	71.59	1.9%	-22.6%
Las Vegas	105.78	-0.3%	-29.9%
Los Angeles	166.52	1.6%	-12.0%
Miami	148.91	1.1%	-18.8%
Minneapolis	122.66	3.2%	-13.7%
New York	174.89	0.5%	-9.6%
Phoenix	108.41	1.6%	-25.1%
Portland	150.46	0.3%	-12.5%
San Diego	153.34	1.6%	-8.9%
San Francisco	132.47	2.8%	-12.5%
Seattle	149.54	0.1%	-14.7%
Tampa	143.43	0.4%	-17.7%
Washington	178.84	1.4%	-7.9%
20-city avg.	146.00	1.2%	-11.3%
Note: The indexes have a base value of 100 in January 2000; so a current index value of 150 translates to a 50% appreciation rate since then for a typical home. Source: Standard & Poor's and Fiserv