Home prices: First drop in 7 months

NEW YORK (CNNMoney.com) -- Home prices fell in November for the first time in seven months, according to a industry report released Tuesday.

The S&P/Case-Shiller 20-city home price index recorded a non-seasonally adjusted decline of 0.2% from October. Prices were down 5.3% compared with 12 months ago.

The loss was unexpectedly large. Experts had forecast that prices would be off by only 5% compared with last November, according to Briefing.com. The lone good news is that the rate of year-over-year declines have continued to shrink.

"While we continue to see broad improvement in home prices as measured by the annual rate, the latest data show a far more mixed picture when you look at other details." said David M. Blitzer, spokesman for Standard & Poor's. "Only five of the markets saw price increases in November versus Ocotber."

Four markets covered by the index -- Charlotte, Las Vegas, Seattle and Tampa -- hit their lowest index levels in four years, according to Blitzer. Any gains they recorded in recent months have been erased.

The five markets that showed month-over-month gains were led by Phoenix, where prices rose 1.1%. Thirteen markets had declines, with Chicago being the biggest loser at 1.1% down. Miami and Dallas showed no change.

Blitzer cautioned, however, that November is a weak time of year for home sales so this might not be a harbinger. In fact, when the data are adjusted for seasonal variations, 14 of the markets recorded gains.

Several markets have been on a strong positive run. Prices have risen in Los Angeles, Phoenix, San Diego and San Francisco for at least six consecutive months. Year over year, Dallas, Denver, San Diego and San Francisco have all entered positive territory, something not seen in at least two years in most markets.

The report failed to stir much passion on the part of industry observers, one way or another. Stuart Hoffman, chief economist with PNC Financial Services called it "not disappointing, considering the big run-up in prices for months before."

He expects continued weakness in home prices through the slow winter months followed by some gains in the spring when the current homebuyer tax credit is scheduled to expire. That should bring out a rush of house hunters looking to beat the deadline. Overall, Hoffman forecasts a flat 2010 -- not a bad thing after the steep drops of the past three years.

"The furious ride down on home sales and prices is pretty much behind us," he said. "I don't think we're going up anytime soon. We've hit the flat part of the roller-coaster ride."

Pat Newport, a real estate analyst for IHS Global Insight pointed out the fall had very favorable buying conditions. Not only was the first-time homebuyer tax credit boosting demand for homes, but mortgage rates were at extreme lows with 30-year, fixed-rate loans available for under 5%.

"It was a good time to buy, and we saw that in the sales numbers," he said.

He doesn't believe we have hit the price bottom, yet. "Most experts think prices are going to drop more, 5% or so, by the end of 2010," he said.