Home prices are a closely-watched indicator for the housing market. In fact, economists agree that a significant turnaround in housing won't happen unless prices show signs of increasing once again. Until then, potential buyers will generally remain on the sidelines, waiting for a better time to enter the market. Unfortunately for the housing industry (and for the furniture industry that relies so heavily upon it), the latest statistics from the S&P/Case-Schiller Home Price Index reveal that home prices continue to fall at an appalling rate and that home sales and housing starts are still far from a rebound.

Charlotte stands out

According to the Case-Schiller Index, home prices declined an average of 14.4 percent during March 2008 (compared to a year earlier) and they fell in almost every major metropolitan area across the nation. The one exception was Charlotte, N.C., where prices rose over the year although the increase was a very modest 0.8 percent. Because the prior gains in Charlotte's home prices were more restrained than in many other metros across the nation, its housing market (and the metro's economy as a whole) is now less at risk of a major downturn. Even still, its stagnating financial services industry (fallout from the sub-prime crisis) is creating slower economic growth within the metro area, thus slowing the increase in home prices and causing construction to flatten proof that even the most stable of metro areas is not immune to the housing crisis.

More stable markets

Other than Charlotte, the metros where home prices fared the best in early 2008 include Dallas, Portland, Seattle, Denver and Boston. In each of these metro areas, home prices declined during March, but in the low single-digits (from just 3.3 percent in Dallas to 5.9 percent in Boston). The reasons why these metros fared better than average are varied, but in all of these areas the local economy is managing better than the nation's.

Dallas, for example, has not only benefited from high oil prices, but its well-diversified economy, low living costs, and business-friendly policies are fueling growth in both population and employment. Similarly, Denver's strong technology industries (particularly telecommunications) are encouraging healthy in-migration and continued economic expansion. Moreover, home price gains for both of these metro areas remained much more subdued during the boom years than in other areas of the country. In March, Dallas home prices were just 19 percent and Denver prices 27 percent higher than they were in 1980.

The Seattle housing market remains in a good position because the metro's economy is among the strongest in the nation. This strength is largely thanks to Boeing and continued growth in commercial aircraft manufacturing. Although its housing market has not been exempt from oversupply, it is likely to take a shorter time to work off excesses because the economy remains healthy. Boston is in a similar, if not quite so robust position. Its economy continues to expand so home price losses have been more modest. Looking ahead, however, its heavier dependence on financial services means that its outlook for job growth and housing is much less optimistic. Portland's housing downturn was delayed by state tax refund checks that were issued at the end of last year; now, however, it looks like a slowdown is imminent. Fortunately, the downturn is likely to remain mild and the metro will quickly recover thanks to housing that is still very affordable.

Less stable markets

Because home prices skyrocketed in the Southeast and Southwest during the early 2000s, the largest price declines are now occurring in these same areas. In March, for example, the sharpest price declines came from Las Vegas (25.9 percent), Miami (24.6 percent), Phoenix (23.0 percent), Los Angeles (21.7 percent), San Diego (20.5 percent), and San Francisco (20.2 percent). In two of these metropolitan areas (Miami and Los Angeles) home prices more than doubled since 1980; in the other four metropolitan areas, home prices rose from 67 percent-85 percent. In each of these metropolitan areas, the local economy has been sorely weakened by the housing crisis and with unsold inventory at historic levels, the market will need a very long time to recover. The furniture industry can't expect much forward momentum from these areas until well into 2009, or even 2010.