By Shobhana Chandra April 27 (Bloomberg) -- Home prices in 20 U.S. cities rose less than forecast in February from a year earlier, a sign a housing recovery will take time to develop. The S&P/Case-Shiller home-price index of property values in 20 cities increased 0.6 percent from February 2009, the first gain since December 2006, the group said today in New York. The median forecast of economists surveyed by Bloomberg News projected a 1.3 percent advance. Home prices in February were 30 percent below the peak reached in July 2006, indicating the industry that helped trigger the worst recession since the 1930s will take years to recover lost ground. A pickup in employment is needed to help stem the damage from mounting foreclosures that are restraining further gains in property values. “The sharp drop in home prices has ended,” Michelle Meyer, a senior economist at Barclays Capital Inc. in New York, said before the report. “We believe that prices are bouncing around the bottom and see little upside potential over the next few years. There is an alarmingly large foreclosure pipeline.” Stock-index futures held earlier losses following the report on growing concern over Greece’s debt crisis. The contract on the Standard & Poor’s 500 index fell 0.5 percent to 1,202.2 at 9:03 a.m. in New York. Less Than Forecast The index was forecast to rise after a year-over-year drop of 0.7 percent for January, according to the median forecast of 23 economists surveyed. Estimates ranged from a decline of 0.8 percent to a gain of 1.6 percent. Year-over-year records began in 2001. The gauge fell 0.1 percent from the prior month after adjusting for seasonal variations following a January increase of 0.3 percent. Unadjusted, prices dropped 0.9 percent in February from the prior month. “These data point to a risk that home prices could decline further before experiencing any sustained gains,” David Blitzer, chairman of the index committee at S&P, said in a statement. “It is too early to say that the housing market is recovering.” The seasonally adjusted and unadjusted series “have given conflicting signals” recently, with the former rising while the latter fell, the group that issues the report said in an April 20 statement. The turmoil in housing in the past few years has influenced the models used in adjusting the data, “resulting in larger seasonal adjustments and misleading results,” according to the group. Better Measure The year-over-year gauges therefore provide better indications of trends in prices, the group said. The panel includes Karl Case and Robert Shiller, the economists who created the index. Eleven of the 20 cities in the S&P/Case-Shiller index showed a year-over-year decline, led by a 15 percent drop in Las Vegas and a 6 percent decrease in Tampa. San Francisco showed the biggest year-over-year increase, with prices rising 12 percent. Compared with the prior month, 19 of the 20 areas covered showed a decrease, led by Portland, Oregon, and Minneapolis. San Diego showed the only monthly increase. Prices may improve in coming months as homebuyers rush to take advantage of a government tax credit worth as much as $8,000 before it expires. Purchase contracts must be signed by the end of this week and transactions need to close by the end of June for buyers to be eligible. Growing Sales Growing demand may help offset the pressure on prices from mounting foreclosures. Filings jumped 16 percent in the first quarter from a year earlier, and bank seizures reached a record, according to Irvine, California-based RealtyTrac Inc. Foreclosures push up the number of homes on the market, forcing builders and sellers to make concessions to get deals done. Some businesses see better prospects. M.D.C. Holdings Inc., the Denver-based builder of Richmond America Homes, said its loss narrowed in the first quarter from a year earlier as orders jumped 38 percent. “While this trend is encouraging, we remain cautious due to the impending expiration of the federal homebuyer tax credit and depressed overall economic conditions,” Chief Executive Officer Larry Mizel said in an April 23 statement. Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Case, a former economics professor at Wellesley College, created the home-price index based on research from the 1980s. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

Source