Housing

Home prices plunge by 4.2 percent, threatening economic recovery

by Peter Schroeder - 05/31/11 1:18 PM ET

Home prices fell 4.2 percent in the first quarter of 2011, hitting a new low and threatening the economic recovery.

Data released Tuesday by Standard & Poor’s and Case-Shiller found home prices continuing to fall in 2011 after already dropping at the end of last year. In the last quarter of 2010, home prices fell by 3.6 percent. Home prices were down 5.1 percent in all of 2010.

{mosads}Of the 20 cities tracked by the Standard & Poor’s/Case Shiller index, 19 experienced a net decline in prices over the last year, with 12 reaching new lows in March.

Eleven cities have reported at least eight straight months of declining home prices.

“This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation … Home prices continue on their downward spiral with no relief in sight,” said David M. Blitzer, chairman of the Index Committee at S&P Indices.

The only city to see home prices grow over the last year is Washington, up 1.1 percent in the last month and 4.3 percent for the year.

By contrast, Minneapolis has seen home prices fall by 10 percent in the last year, as the cities of Atlanta, Charlotte, N.C., Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland, Ore., and Tampa, Fla., all reached new lows in March.

The data come on the heels of two disappointing economic reports from last week — those regarding gross domestic product and initial unemployment claims. Both of those indicators reported worse economic conditions than anticipated by economists. The bleak housing data also come days before the Labor Department releases its monthly report on jobs.

Blitzer said that the rebound in home prices seen in 2009 and 2010 can be largely credited to the first-time homebuyer tax credit. However, if that tax incentive is removed, there is no apparent recovery or even stabilization of home prices, he said.