U.S. home prices fell to its lowest levels in six years in December, according to
Standard & Poor’s Case-Shiller home-price indices.

Home prices fell 3.8 percent and 4 percent year-over-year. Prices are a third
lower than their peak in 2006. This is the eighth month in a row of price

“In terms of prices, the housing market ended 2011 on a very disappointing note,”
said David Blitzer, Chairman of the Index Committee at S&P Indices.

Even with a worse then expected drop in prices for the end of 2011, some
economists are seeing signs of change. Two different housing markets have
emerged, one of distressed sales and another one of healthier, undistressed sales.
The distressed sales, those home sold in foreclosure or as short sales, push the
housing prices down. Buyers of foreclosed properties tend to pay less because of
concerns that the previous owners neglected or damaged the house.

Corelogic Housing Index ran the numbers for both markets in December
2011. The Corelogic shows a 4.7 percent decrease from December 2010. But if
distressed sales are excluded, December’s prices rose 0.2 percent, its first month-
over-month gain since July 2011.

“Broadly speaking the distressed market continues to be weak and undercuts
the strength of the undistressed market,” said John Hermann, president of
Herrmann Forecasting.

Only Miami and Phoenix out of the 20 metropolitan areas Case-Shiller tracks saw
an uptick in home prices from a month earlier. Atlanta’s prices dropped the most
at 12.9 percent. Only Detroit showed a 0.5 percent uptick in home prices from

This is the fifth year housing price decreased because of tight mortgage
requirements, high unemployment and foreclosures. But newer data from 2012
hints at improving fortunes for the housing industry. The National Association of
Realtors put out a report last week that indicated the inventory of unsold homes
dropped to 5.6 months of supply, around the ideal level of 6 months.

Sales of previously owned homes rose 8 percent compared to January 2010. Last
month’s $26 billion mortgage settlement by states’ attorneys general against
major banks has helped to placate investors’ concerns on the future health of the

But these improvements will take time to boost home prices, a lagging indicator.

“If you look at what happened in the last three years its been up down up
down,” said Nathaniel Karp, a BBVA Compass Bank economist. “I think that’s
going to stay going up and down in the next few months.”

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