Finance and Economic

Home prices in 20 U.S. cities probably fell in September at the slowest pace in almost two years, underscoring improvement in real estate that’s helping the economy emerge from recession, economists said ahead of a private report today.

The S&P/Case-Shiller home-price index declined 9.1 percent from September 2008 after an 11.3 percent year-over-year decrease a month earlier, according to the median forecast in a Bloomberg News survey. Separate reports may show consumer confidence slipped this month on weaker employment prospects, while third-quarter economic growth was slower than first estimated.

Rising home sales, aided by government programs and a decline in mortgage rates this year, have helped stem the slump in property values that precipitated the worst recession since the 1930s. Home buying and consumer spending may still be hindered by higher unemployment.

“It looks like some kind of corner has been turned in the housing market,” said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. “It will take time for more people to line up. That said, I do think housing has turned.”

The home-price report is scheduled to be released at 9 a.m. in New York. Estimates ranged from declines of 8.3 percent to 10.3 percent.

The Conference Board in New York will report on consumer confidence at 10 a.m. The figures may show the index fell to 47.5 in November from 47.7, according to the median estimate in a Bloomberg News survey.

GDP Revision

The Commerce Department will release its first revision to third-quarter gross domestic product at 8:30 a.m. in Washington. The report may show growth of 2.8 percent at an annual rate, slower than the 3.5 percent pace reported Oct. 29, as the trade deficit widened and inventories were leaner.

On a monthly basis, home prices have risen in the past three months, according to S&P/Case-Shiller, signaling some stability in the housing market.

Existing home sales in October rose to a 6.1 million annual rate, the highest level since February 2007, the National Association of Realtors said yesterday. The sales increase is helping reduce housing inventory. At the current sales pace, it would take 7 months to sell the 3.57 million homes on the market. The months’ supply is the lowest since February 2007.

The Standard & Poor’s Supercomposite Homebuilding Index has risen almost 18 percent since the beginning of July as the outlook on housing brightened. It rose 0.8 percent yesterday.

Tax Credit

Housing has been among the industries helping stabilize the U.S. economy. To ensure the recovery in housing continues, President Barack Obama and Congress this month extended a tax credit of as much as $8,000 for first-time homebuyers until April 30, from Nov. 30. They also expanded it to include some current owners.

Concern over the looming expiration of the credit earlier this month weighed on builder sentiment and may have been the reason the Mortgage Bankers Association’s purchase applications index fell to a 12-year low in the week ended Nov. 13. The bankers group is scheduled to release last week’s applications report tomorrow.

While the erosion of house prices is starting to end, it will take “a considerable amount of time” for the market to recover fully, Federal Reserve Bank of Cleveland President Sandra Pianalto said in a speech Nov. 17.

“Though we have seen some signs that the worst may be over, the housing industry is not out of the woods yet,” Pianalto said at a housing conference sponsored by the Ohio Housing Finance Agency and Ohio Capital Corporation for Housing. “Nor is the broader economy.”

Unemployment, Foreclosures

Rising unemployment and foreclosures remain risks for the housing market and the economy. Foreclosures on prime mortgages and home loans insured by the Federal Housing Administration rose to 30-year highs in the third quarter, the Mortgage Bankers Association said Nov. 19.

The unemployment rate increased to a 26-year high of 10.2 percent in October, which may lead to more mortgage defaults and an increase in foreclosed properties that would push prices lower.

D.R. Horton Inc., the second-largest U.S. homebuilder, on Nov. 20 reported a fourth-quarter loss that exceeded analysts’ forecasts and said the housing outlook remains difficult.

“The thing that drives our business the most is job creation,” Chief Executive Officer Donald Tomnitz said on an earnings call for analysts. “If we look at the macro economic environment, it’s not good for us.”

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