New reports give bleak outlook on housing, economy

While higher food and gas prices eat into Americans' wallets and incomes, falling home prices are eroding the value of their largest asset.

(AP) -- U.S. home prices dropped at the sharpest rate in two decades during the first quarter, the Standard & Poor's/Case-Shiller national index showed Tuesday, a somber indication that the housing slump continues to deepen.

Prices tumbled more than 14 percent during the quarter and are at levels not seen since the third quarter of 2004. While the index is still up 60 percent from 2000, millions of homeowners who bought in the past four years with little or no money down now owe more than their homes are worth.

Meanwhile, the government reported Tuesday that new home sales unexpectedly rose 3.3 percent from March to April, driven by a surge of purchases in the Northeast. It was the first increase in six months and what seems like, on face value, a hint of rosier days ahead.

But April's sales also looked better in part because of a large downward revision to the March numbers. And the median home price fell 4.2 percent last month to $246,100.

Inventory also edged lower in April, but David Seiders, chief economist for the National Association of Home Builders, waved off any hint of good news because the numbers don't include contract cancellations by nervous buyers.

"There are still major uncertainties on the supply side," Seiders said.

A bottom isn't in sight, he thinks, and with reports like S&P/Case-Shiller's home price index, which he called "chilling," skittish buyers will continue to sit on the sidelines until prices stop falling.

Greg Johnson in San Diego is looking to buy a a four-bedroom house in the northern part of the county. The 38-year-old sold his condo two years ago at the peak of the market and has been renting a house ever since.

"I fully expect that pricing will continue to drop," he said. "Some of my buddies speculate there will be a lot more product dropped on the market because of foreclosures. So I'm just waiting and watching how things go."

Already, he can afford houses in areas that were once out of his reach, like in Carlsbad, Calif. He's seen properties listed six months ago for $700,000 slashed to $450,000.

"I can be a bit choosier," Johnson said. "I don't feel so rushed to jump in."