Home values tumbled at a record rate in October, according to a widely watched report released yesterday that also indicated that the housing downturn is spreading and worsening.
Home prices fell 18 percent in October compared with the same period a year ago, according to the Standard & Poor’s/Case-Shiller index of 20 large metropolitan markets. That was the steepest decline recorded on data stretching back to 1987, pushing prices back to their 2004 levels.
The Case-Shiller data reinforce government and industry reports showing that the recession has pushed down home sales and prices at faster rates. Low mortgage interest rates and prices weighed down by a glut of foreclosed properties for sale have not been enough to bring potential buyers into the market. That has forced prices down more.
“It doesn’t matter what the mortgage rates are, [buyers] are waiting on the sidelines,” said Donald Ratajczak, consulting economist for Morgan Keegan of Memphis.
Combined with consumer confidence unexpectedly tumbling to an all-time low, analysts said the data reflect weakness in two areas critical to the economy’s turnaround: housing and consumer sentiment. If consumers remain nervous and continue to curtail spending, it could prolong the recession, they said.
Despite the downbeat economic reports, stocks surged in the last hour of trading after being flat most of the day. The Dow Jones industrial average climbed 2.2 percent, or 184.46 points, to 8668.39, while the Standard & Poor’s 500-stock index was up 2.4 percent, or 21.22 points, to close at 890.64. The tech-heavy Nasdaq Stock Market was up 2.7 percent, or 40.38 points, to 1550.70.
Investors shrugged off the poor economic news, which showed that Western states remain among the hardest hit by the housing downturn. Prices in Phoenix and Las Vegas fell 32.7 percent and 31.7 percent, respectively, according to the Case-Shiller report.
Prices in the Washington region were down 18.7 percent in October compared with a year earlier. Prices in the region fell 2.7 percent compared with the previous month, making it one of six areas to see their largest monthly declines on record.
Some analysts had expected signs that home prices were stabilizing, but instead the downturn is deepening in some parts of the country, according to the index. Home prices in Atlanta, Seattle and Portland lost about 10 percent compared with October 2007, putting them in the double-digit club for the first time.
“While not yet experiencing as severe a contraction as in the Sunbelt, it seems the Pacific Northwest and mid-Atlantic South are not immune to the overall demise in the housing market,” David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said in a statement.
Meanwhile, worries about the weak labor market and expectations that the economy will worsen next year sent consumer confidence to a new low, according to another report released yesterday.
The index fell to 38 in December, compared with 44.7 in November, when there was a modest improvement, according to the monthly survey from the Conference Board, a private research group.