By Bob Willis Jan. 26 (Bloomberg) -- Home prices in 20 U.S. cities rose in November for the sixth consecutive month, signaling the industry that precipitated the worst recession since the 1930s is stabilizing. The S&P/Case-Shiller home-price index increased 0.2 percent from the prior month on a seasonally adjusted basis, after a 0.3 percent rise in October, the group said today in New York. The gauge was down 5.3 percent from November 2008, exceeding expectations and the smallest year-over-year decline in two years. As home values firmed and stocks climbed in the second and third quarters of 2009, households recovered almost $5 trillion of the record $17.5 trillion in wealth lost since 2007, showing there remained much ground to make up. A projected increase in foreclosures this year as unemployment is slow to drop may prevent prices from recovering much more. “We’re seeing what looks to be a bottoming out in prices,” said Michelle Meyer, an economist at Barclays Capital Inc. in New York. “There is a risk we see further downside, given the large amount of foreclosures set to enter the market and the uncertainty of the effects of the homebuyer tax credit on prices.” Stock-index futures held earlier losses following the report. The contract on the Standard & Poor’s 500 index was down 0.4 percent to 1,088 at 9:27 a.m. in New York. Treasury securities rose. Survey Results Economists surveyed by Bloomberg News anticipated prices would drop 5 percent in the 12 months to November, based on the median estimate of 27 projections. Estimates ranged from declines of 4.5 percent to 6 percent. From the July 2006 peak, the 20-city index was down 29 percent. Compared with the prior month, 14 of the 20 areas covered showed an increase on a seasonally adjusted basis while six had a decline. The biggest month-to-month gain was in Phoenix, which increased 1.6 percent. New York showed the biggest drop at 0.9 percent. San Francisco posted the second-biggest increase, at 1.5 percent, followed by 1 percent gains each in Los Angeles and San Diego, and a 0.9 percent gain in Portland, Oregon. “Some of the boom-to-bust markets in California are starting to see home prices appreciate as demand returns,” said Meyer. Broad Improvement All of the 20 cities in the S&P/Case-Shiller index showed a smaller year-over-year decline in November. The monthly price increases have diminished since the index climbed an average 1 percent in July and August, indicating foreclosures may again be hurting property values. A record 3 million U.S. homes will be repossessed by lenders this year as high unemployment and depressed home values leave borrowers unable to make mortgage payments or sell, according to a RealtyTrac Inc. forecast on Jan. 14. Last year there were 2.82 million foreclosures, the most since RealtyTrac began compiling data in 2005. KB Home, the Los Angeles-based homebuilder that sells to first-time buyers, is among homebuilders struggling. The company Jan. 12 reported a pretax loss of $91 million on declining revenue for the fiscal fourth quarter that ended Nov. 30. Builder Loss KB Home is “not going to make money in the first quarter” and plans to “restore profitability” in the second half of 2010, Chief Executive Officer Jeffrey Mezger said Jan. 12 in a conference call with analysts and investors. The end of Federal Reserve purchases of mortgage-backed securities aimed at keeping borrowing costs low represents another challenge for the industry. The program is scheduled to expire by March 31. Policy makers meet today and tomorrow to discuss the direction of the benchmark lending rate between banks. The emergency programs were being wound down “in light of ongoing improvements in the functioning of financial markets,” central bankers said in their Dec. 16 statement. Karl Case, a former economist professor at Wellesley College, and Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, created the home-price index based on research from the 1980s. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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