Three measures of home prices issued monthly by S&P/Cash-Shiller declined yet again in March.  The data released today showed that the national composite, the 10-City and 20-City housing price indices ended the first quarter of 2012 at new post-crisis lows.

The national composite fell by 2.0 percent from the fourth quarter of 2011 and was down 1.9 percent compared to the first quarter of 2011.  While the changes from a month earlier were minimal (less than 0.1 percent) the 10-city was down 2.8 percent from a year earlier and the 20-City lost 2.6 percent.

At a press conference preceding the release, David M. Blitzer, Chairman of the S&P Index Committee said that flat monthly returns in March did indicate price stability and could be an indication of future gains.

Robert Shiller, Professor of Economics, Yale University, said that the housing patterns we are seeing have lasted a long time.  There are indications that we may be breaking out of the flat pricing trend, but previous attempts to do this have fizzled. 

Karl Case, Professor of Economics Emeritus at Wellesley College, said we don't have a lot of knowledge about how bubbles unwind but the first positive indicators appear to be volume data such as existing home prices, new home sales, housing starts, and affordability.  These have all been up in recent months, but are still not great relative to history.  Housing starts, in fact are still below what was a previous 30 year low.

Case said other positives to look for are declining inventories, and distressed properties, improving demographics especially housing starts, and low vacancies.  Countervailing forces would be tight credit, the shadow inventory, the overall economy and the wild card of the economy in Europe. 

Another factor which could negatively impact housing is the final outcome of current discussions about risk-based prices.  Case said that if the government divorces itself from the risk, interest rates could rise by as much as 300 basis points.

As regards demographics, Case said one key is household formation which is needed to absorb increases in housing stock.  While household formation has been down, affected by falling immigration, the age distribution, and doubling up in housing, new census data shows that in the first quarter household formation rose by one million.  However, during the same period rental households increased by 1.5 million which means that owner occupied households are disappearing; that homeowners are becoming renters at a rapid pace. 

Returning to the Indices, Blitzer said that while there have been improvements in some regions, housing prices have not turned.  "This month's report saw all three composites and five cities hit new lows.  However, with last month's report nine cities hit new lows.  Further, about half as many cities, seven, experienced falling prices this month compared to 16 last time."

Only three cities, Atlanta, Chicago, and Detroit saw annual rates of change grow worse in March.  The other 17 cities and both composites improved the annual rate of change from February.  In seven cities, Charlotte, Dallas, Denver, Detroit, Miami, Minneapolis, and Phoenix, the annual rates of change are now positive.

As of the first quarter of 2012, average home prices across the U.S. are back at their mid-2001 levels and the 10 and 20-City composites have returned to levels in late 2001 and early 2003 respectively.