Bay Area home prices fell slighly in the first quarter of 2011 and posted a 5.1 percent drop over the previous year, according to the S&P Case-Schiller home-price index, a leading measure of the U.S. housing market.
Local home prices are now 40 percent lower than their peak, said David Blitzer, the S&P's Chairman of Index.
"This is disturbing, very, very disturbing," said Michael Lehmann, a professor emeritus of economics at the University of San Francisco.
Lehmann said a continued downward trend in housing prices means residential construction will continue to lag and unemployment will stay high.
"Residential construction is depressed and so commerical building is depressed, and that is a source of employment and health for the economy. I don’t see how we can see a healthy economy until residential construction recovers here in the Bay Area," Lehman said.
According to the S&P's Blizter, the year-over-year decline in home prices comes partly as a the result of the expiration of an $8,000 federal tax credit for first-time home buyers, which was part of the federal stimulus program.
When the tax credit was available in 2009 and the early part of 2010, there was a brief buying boom, Blizter said, but when the credit expired the housing market again declined.
Still, Blitzer said, the Bay Area's housing market remains much stronger relative to much of the rest of the country. Local housing prices are still slightly higher than when they hit bottom in March 2009.
"San Francisco got caught up in the boom as much as any place," Blizter said, "but San Francisco and San Diego have been able to separate themselves from this Sunbelt disease. They don’t look like Las Vegas, Phoenix, Tampa, and Miami, which all set new lows."
in Atlanta, Cleveland, Detroit, and Las Vegas, prices have fallen below January 2000 levels, the Index shows; while in the Bay Area, housing prices remain 29% higher than they were before the tech bubble burst.
The Index reflects home sales in the Census-defined San Francisco metropolitan area, which includes San Francisco and the East Bay, but not Santa Clara County.