Home prices in March up from last year but down from February

Home prices in 20 major cities gained ground in March for the second consecutive month compared with their beaten-down year-earlier levels, new data released Tuesday showed. But prices fell when measured on a month-to-month basis, underscoring continued weakness in housing.

Prices rose 2.3% in March compared with the same month last year but fell 0.5% from February, marking the sixth consecutive monthly decline when the data aren’t adjusted for seasonal fluctuations, according to the Standard & Poor’s/Case-Shiller index of 20 metropolitan areas.

“The housing market may be in better shape than this time last year, but when you look at recent trends, there are signs of some renewed weakening in home prices,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. “In the past several months we have seen some relatively weak reports across many of the markets we cover.”

Adjusted for seasonal variations, the 20-city index was flat. But Standard & Poor’s began warning last month that the index’s seasonally adjusted version was no longer a reliable gauge of where prices are going because of distortions caused by the economic crisis.

The mixed reading from the Standard & Poor’s/Case-Shiller index of 20 metropolitan areas left economists in disagreement over where the market was headed and the best way to measure progress.

“There is a lot of fundamental difference of opinion now, and so it’s not like we have any agreement of what the model is,” said Yale professor Robert J. Shiller, a co-creator of the index.

“I think that has to do with just the uncertainty of this economic crisis, and it’s really unknown,” Shiller said. “I think there is significant risk going forward in investing in real estate, but that doesn’t mean it is going to go down, I don’t know with any certainty.”

Sales of homes nationally have taken off in recent months, with prices falling so much that many markets are now very affordable. Interest rates also remain at rock-bottom levels, creating an attractive environment for buyers who qualify for a mortgage. In addition, the government has supported the mortgage market through the Federal Housing Administration and provided federal tax incentives for buyers.

But as some of the government stimulus winds down, economists fear prices could decline again. The potential for more foreclosures, which typically sell at a steep discount, could send prices falling.

Of the 20 metro areas that the closely watched index tracks, 10 posted price gains in March compared with the same month one year earlier, reflecting a rebound from the depths of the financial crisis last year.

California cities posted some of the strongest growth, with San Francisco up 16.2% for the year, San Diego up 10.8% and Los Angeles gaining 6%. Sam Khater, senior economist for CoreLogic, which follows the mortgage market, was skeptical of the Golden State’s improvements.

“That is just not matched by fundamentals at all, so it is clear that prices are being impacted by the artificial interventions in the market — by the administration helping to restrict supply and boost demand,” he said. “I would expect prices to fall after the stimulus begins to recede later this year.”

Compared with February, prices in 13 metro areas dropped in March. Again, California cities were strong, with San Francisco and San Diego both rising 1.5%, though Los Angeles fell 0.7%.

The 20-city index is now at spring 2003 levels. The index compares the latest sales of detached houses with previous sales and accounts for factors such as remodeling.

alejandro.lazo@latimes.com