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Home Price Continues The Decline

Contributed by mm | August 28, 2007 8:44 PM PST

Today S&P released the Q2 figures for its S&P/Case-Shiller® Home Price Indices. Not entirely surprisingly, the numbers are suggesting that the average price for single-family house in the top 20 metro areas is down 3.2% from a year ago.

Out of the 20 metro areas tracked by the index, 14 reported a year-over-year decline and Detriot is leading the board with a tumble of 11%. Some other cities, however, are still maintaining single-digit appreciations, including 7.9% in Seattle and 6.9% in Charlotte.

Here are the individual readings and year-over-year changes of each of the 20 areas:

Metro Area 06/2007 Reading YoY % Change
Atlanta 136.12 1.6%
Boston 171.30 -3.7%
Charlotte 135.05 6.8%
Chicago 165.96 -0.7%
Cleveland 118.54 -3.6%
Dallas 126.53 1.6%
Denver 138.09 -1%
Detroit 109.57 -11%
Las Vegas 221.86 -5.1%
Los Angeles 262.12 -4.1%
Miami 264.89 -4.8%
Minneapolis 164.35 -3.8%
New York 208.52 -3.4%
Phoenix 212.52 -6.6%
Portland 185.76 4.5%
San Diego 231.37 -7.3%
San Francisco 209.48 -4%
Seattle 191.92 7.9%
Tampa 219.37 -7.7%
Washington 233.52 -7%

And here comes some pessimistic remarks in a WSJ article reporting the same data set:

"These pricing pressures have not been seen in post-World War II history," said economist Brian Bethune at Global Insight. "It's very difficult for the markets to be able to deal with that kind of stress."


Mr. Bethune noted that today's price declines are worse than those during the housing bust of 1990-91 that preceded a national recession. "The housing market is definitely a leading indicator of a potentially more serious downward moment in the economy," he said.


Since the recent turmoil in the credit market happened after the reporting period of this release, we couldn't yet assess the impact to the home price. But most likely, things will get worse before they get better. Not entirely a bad news for me (given I don't own a property now), although housing price in Seattle, where I bought and sold a house in the last five years, is still strong.

By the way, if you are confused of the different home price indices, Forbes has a good piece discussing the differences:

On Monday, the National Association of Realtors reported its first year-long slide in home prices. The NAR said the median price of homes sold in July was down 0.6 pct from July of 2006. It was the first time the national median price has fallen 12 months in a row since the NAR's price records began in 1968.


And on Thursday, federal housing records are expected to show their first median price decline since they began in 1950. Economists are predicting a 1-2 pct drop for the quarterly index released by the Office of Federal Housing Enterprise Oversight -- Fannie Mae's and Freddie Mac's regulator.

Each of the indexes has its deficiencies. S&P's Case-Shiller indexes capture prices at repeat sales or refinancings on the same homes. That means they are not biased by a shift in the composition of sales -- toward cheaper or more expensive homes -- which can happen in the Realtors' reported median price. However, it tends to be over-weighted in real estate bubble regions such as Los Angeles and Miami. The OFHEO median captures only 'conforming' mortgages of 417,000 usd or less and leaves out so-called jumbos.

Despite the deficiencies, economists say the home price reports are all describing the same picture -- one that puts off potential buyers. People don't want to borrow money to finance what could be a depreciating asset.


This Post Has Received 8 Comments. Share Your Opinions Too.


MONEY BLUE BOOK Commented on August 28, 2007

I definitely feel for the home owners out there - not so much for the speculators and flippers though...

I don't expect the real estate market to recover for 2 more years - at least not until 2009. Guess I will stay on the sidelines and save up for a house in the meantime.

NAR is made up of a bunch of self interested liars! I never trust any of their press releases...Pure junk!

-Raymond (MONEY BLUE BOOK)


Deborah Commented on August 29, 2007

I think the best time to buy after a peak is 4-7 years, so if you must own a home saving until 2010 to 2013 is a good idea.

If you really study the economics of home ownership it can not increase wealth the way it has in the past, and buying at a peak or close to one can truly destroy a person's economic future.


Anna Commented on August 29, 2007

I trashed my credit at a young age, but I'm slowing staring to build it back by paying off old debt. I would love to have a new home in the next 3 to 5 yrs. I like to do surveys and stuff for the extra income, try this one if you're interested in them, they pay the best and it's free: http://tinyurl.com/yp9vgk


joewatch Commented on August 29, 2007

When it comes to owning a home to live in, I think it's a mistake to try to time the market. IMHO, buy when you can afford it. Don't buy if you plan to stay in the home less than 5 years. Get a 30-year fixed mortgage. Don't put down less than 20%. Of course, (and this is the tough part) don't over-pay.


Jill at housewifery.wordpress.com Commented on August 29, 2007

The different projections here for a stabilized market are interesting. My husband and I live in Washington, DC, sold the car years ago, and now walk to work. The savings from zero car payments/insurance have really motivated our savings margins. We've decided to delay home ownership until our emergency cash reserves are stronger and down payment savings more robust. So your time estimates are encouraging.


Nabloid.com Commented on August 31, 2007

I wish real estate prices were falling up here (Canada)... instead all we continue to see is double digit gains... I don't own anything yet (I'm relatively young), and I would LOVE to see prices drop... but with an economy this hot, that don't look likely.


john Commented on September 3, 2007

Cramer said to sell all your real estate because there's going to be a major crash. Sell before you're the last one holding worthless real estate. Sell even if you're going to take a loss because it's going lower. Sell! Sell! Sell!


Fred333 Commented on September 24, 2007

I think it all depends on the type of real estate that you own. If it is a residential then you should be looking to sell, but if it commercial I would hold on to it.


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