Home prices likely fell in October vs. year ago

[December 29, 2009]  NEW YORK (AP) -- The latest reading on home prices is expected to show a decline from year-ago levels, but since June government programs to boost home sales have helped prices improve on a monthly basis.

The figures for October, which will be released Tuesday, should reflect the rush of homebuyers trying to complete their purchases before the original expiration of a federal tax credit. The Nov. 30 deadline was extended last month to April 30.

"The (tax) credit likely held the floor on prices for a time," said Zach Pandl, an economist at Nomura Global Economics.

Economists predict the Standard & Poor's/Case-Shiller home price index of 20 major cities fell 7.2 percent compared to October last year, according to Thomson Reuters.

The annual declines have been shrinking since the spring, so if the October reading falls far short of expectations it could "reopen the debate on whether prices have reached bottom or not," Pandl said.

The Thomson Reuters survey does not include an estimate for the change from September, but IHS Global Insight expects the index will show a slight increase, marking the fifth straight monthly gain.

"Sales numbers were strong in October, so we'll probably see higher prices" from September, said Patrick Newport, an economist with IHS Global Insight.

In addition to a credit of up to $8,000 for first-time buyers, Congress expanded the program to include homeowners who have lived in their current properties for at least five years. They can now claim a tax credit of up to $6,500 if they relocate.

About 2 million homebuyers have already tapped the original tax credit, the National Association of Realtors estimated, and another 2.4 million are forecast to take advantage of the new credits.

But the immediacy that fueled the recent sales flurry has dissipated and buyers are biding their time, as recent home sales data showed. New home sales plummeted unexpectedly by 11 percent in November from October, the Commerce Department reported last week.

[Associated Press; By J.W. ELPHINSTONE]

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