U.S. home prices dropped for the ninth consecutive month in January and despite a smaller decline than previous months, the numbers are only encouraging compared to the market’s previous tumbles.

The average home price dropped 3.8 percent according to Standard & Poor’s Case-Shiller home-price indices for the 20 largest metropolitan areas. Prices are now at levels last seen in early 2003. A marginal month over month increase was seen from December 2011, when prices dropped 4.1 percent.

“The rate of change is slowing and that is a good thing,” said Joseph Brusuelas, a director at Moody’s Economy.com. But, “It’s going to be a long hard sludge and it’s likely to be a few years before the market resembles something normal.”

Only Denver, Detroit and Phoenix saw an increase in average home prices year over year. Atlanta, the weakest market for the last several months, is down almost 15 percent from last year. Seven of the markets tracked in Case-Shiller were down by at least one percent. The Charlotte metropolitan area was not included in the results due to reporting delays.

This decline is a vast improvement to January 2009, when prices fell almost 20 percent. All 20 cities tracked in the index also declined in the same period. Even a year ago, January saw a rebounding market begin a double dip. At the time, David M. Blitzer, the Chairman of the Index Committee at Standard & Poor’s, said there was “no real hope in sight for the near future.”

Other home price indices paint a similar picture of a still weak market. The National Association of Realtors reported a slight increase in prices by 0.3 percent in February, the first jump seen since November 2010. The Federal Housing Finance Agency’s index did not show any gains for January.
Even when prices do stabilize, home sales might never contribute to the economy like in 2005.

“In most of the country, I think it could well be that home prices could never repeat this boom,” said Robert Shiller, one of the creators of the index, at a talk at the Museum of American Finance.

While many other carefully watched indicators like automobile sales and durable goods orders are inching up, housing prices are not showing signs of life. These improved sales suggest returning consumer confidence in the American economy. Investors, however, do not believe home prices have reached a bottom and are putting off buying a home, keeping prices low.

The falling unemployment should help spur sales, since job security is necessary for buying a home, but the mixed economic signs within the housing market are not helping the recovery. The surplus of foreclosures, a warm winter that helped create a new building boom and strict loan requirements are all weighing down sale prices. Even things not directly connected to housing, like changing technology and oil prices are having an effect, according to Shiller.

“There’s so many factors I don’t think that anyone can quantify it,” Shiller said. “I’m not going to try either.”

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