Home Prices Remain Lodged in Downward Trend

Some markets are improving, but prices continue to fall nationally.

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All three headline composites ended the first quarter of 2012 at new post-crisis lows.

Despite pockets of improvement across the country, home prices still haven't turned around, according to new data released Tuesday.

Prices reached new post-crisis lows in the first quarter, falling 2 percent according to the closely-followed Case-Shiller Home Price Indices, bringing the property value loss to about 35 percent from the 2006 peak.

The 10- and 20-city composites had annual rates of decline of 2.8 percent and 2.6 percent respectively.

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Still, there were some better numbers at the metro area level—12 cities reported month-over-month price increases from February and Las Vegas, a particularly hard-hit city, was flat. Phoenix, another badly hit city, had the strongest annual growth rate, up 6.1 percent.

"This is what we need for a sustained recovery," said David Blitzer, chairman of the Index Committee at S&P Indices, in a statement. "Monthly increases coupled with improving annual rates of change. Once we see this on a broader level we will be able to say the market has turned around."

But there are plenty of obstacles with the potential to derail more improvement in the housing market.

For one, home prices typically rise in the more sales-heavy spring and summer months, according to Blitzer, which could be giving a rosier tint to the current state of the housing market.

"Since we are entering a seasonal buying period, it becomes very important to look at both monthly and annual rates of change in home prices in order to understand the broader trend going forward," he said.

[Read: Homeowners in Battleground States Dogged By Underwater Mortgages.]

Also, nearly one-third of all homeowners with mortgages are under water, meaning they owe more on their loans than their home is worth. Many underwater homeowners can't or don't want to sell their homes at a huge loss, which is tightening the inventory of homes for sale and "creating acute imbalances in supply and demand in some markets," according to Stan Humphries, chief economist at real estate website Zillow.

"Job growth and negative equity remain major factors in the housing market and ones that will cast long shadows over the recovery," he adds.

Meg Handley is a business reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter.