Record Drop in Home Prices Feeds Pessimism on Economy

Housing prices in 20 U.S. cities fell 19 percent in January from a year ago.

By + More

In the swiftest drop on record since a key housing index was launched in 2001, home prices in 20 American cities fell 19 percent in January 2009 from what they were one year before. Coming alongside a poll that underlines Americans' pessimism on the economy, the news points to the country's continuing struggle to climb out of the recession—and, analysts say, means that more job cuts are likely.

Most of the cities in the Standard & Poor's/Case-Shiller index—14 of the 20—had decreases in home prices of more than 10 percent, the report says. In some metropolitan areas, prices nearly halved. That includes Phoenix, the hardest-hit city, with a 35 percent drop, and Las Vegas, with a 32.5 percent drop. And none of the cities on the index had their housing prices rise or stay the same from the year before.

"There are very few bright spots that one can see in the data," the index committee's chairman, David Blitzer, said in a statement. That's particularly disappointing in the wake of a report last week that had seemed to give reason for optimism. It found that sales of new, one-family houses in February rose 4.7 percent above January's rate.

In other grim economic news, meanwhile, the Conference Board reported today that after hitting an all-time low in February, the consumer confidence index remained about the same in March. In both months, a little more than half of respondents called business conditions "bad," while about 7 percent said that they're "good."

Pessimism about the current state of affairs aside, many Americans actually think the country is on the right track, according to a new poll. Those optimists remain a minority, but their 42 percent share is the highest it has been in five years. And just last fall, as many as 90 percent thought the country was going in the wrong direction, compared with 57 percent now. The Washington Post/ABC News poll also found that respondents continue to give President Obama particularly high marks, with two thirds approving of how he's handling his position and 3 in 5 saying he's doing a good job on the economy.

That's partly because Americans seem to be blaming the financial system and banks' excesses more than the new administration for the country's economic woes. Even so, if Obama's programs to save the economy don't show some successes in turning the economy around, from his $787 billion stimulus package to his plan to restructure Chrysler and General Motors, he runs the risk of losing some of that political capital.

Read Obama: GM, Chrysler Must Restructure or Face Bankruptcy.