Home prices decline at record pace in Q1
Filed under: Economy
The U.S. housing sector's long, painful journey hit another bump in March. Home prices in 20 cities declined at an 18.7 percent annual pace in March -- a larger decline than February's annual pace, according to the S&P/Case-Shiller U.S. National Home Price Index (pdf).
What's more, home prices in the 20-city survey fell at a record 19.1 percent annualized pace in Q1 compared to a year ago. Home prices in the 20-city index fell at 18.6 percent and 19 percent annualized rates in February and January, respectively. Economists surveyed by Bloomberg News had expected the S&P/Case-Shiller Home Price Index to fall 18.4 percent in March. Also, home prices in the 10-city index declined at an 18.6 percent annual rate in March.
One bright spot in the survey data: despite the quarterly data, March was the second consecutive month the 20-city and 10-city indexes did not a post a record annualized decline.
Pervasive declines persist
Otherwise, March's data offered little evidence of a sudden rush of buyers into the housing market. The areas with the largest annual percentage declines were: Phoenix, -36.0 percent; Las Vegas, -31.2 percent; San Francisco, -30.1 percent; Miami, -28.7 percent; Los Angeles, -22.3 percent; and San Diego, -22.0 percent.
Year-over-year percentage price changes in other, major, U.S. cities were as follows: New York, -11.8 percent; Chicago, -18.6 percent; Boston, -8.0 percent; Washington, D.C., -18.4 percent; Atlanta, -15.7 percent; Dallas, -5.6 percent; Denver, -5.5 percent; and Seattle, -16.4 percent.
Still, despite the disappointing March data, John Herrmann, chief economist at Herrmann Forecasting in New Jersey, is in the camp that argues that the housing sector is attempting to form a bottom.
"Things are stabilizing and the inventory of unsold homes is starting to shrink," Herrmann told Bloomberg News Tuesday. "There's a slightly better matching of buyers and sellers in the market and that means sellers have to use slightly less incentive to get their homes sold."
Originally greeted by Wall Street with a shrug, S&P/Case-Shiller home price data rose to market-mover status in 2008 as it became clear that the United States' housing boom during the past decade was, in fact, a bubble fueled considerably by mortgage market excesses, from borrower to lender. The bursting of that bubble triggered record home mortgage foreclosures and mortgage back securities defaults (toxic assets), which led to the financial crisis that the U.S. and world are still trying to end today.
As a result, investors, economists, homebuilders, and homeowners alike now closely monitor Case-Shiller home price data in order to discern clues as to when the housing slump may end -- a recovery that historically has contributed to U.S. GDP growth.
Housing Sector/Economic Analysis: Despite the record Q1 Case-Shiller year-over-year decline, there is room for hope in the U.S. housing market: price declines appear to be decelerating, and inventories appear to have peaked. That said, housing demand remains low in most regions of the U.S., and until home buyers re-emerge, the housing sector will remain in recession.
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Reader Comments (Page 1 of 2)
5-26-2009 @ 2:06PM
Greg said...
In Milwaukee, they assess homes in January, and tax rates are based on those assessments. The government "claims" that housing where I live only went down 2.9% from January, 2008 to January, 2009. Of course this seems bogus, but what can you do? There has been a real slowdown in sold properties.
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5-26-2009 @ 2:07PM
cmorse1052 said...
Buy a house today, you're upside down tomorrow. The only industry that can right this ship are the banks themselves. As long as the foreclosure glut continues, home values will drop. Banks are currently holding 600K foreclosures, they are looking for the slightest uptick in the housing markets and they'll dump these properties. All this is going on while a record number of people are at some stage in the process, I think the estimates are at 3M for this year alone. Not looking any better for next year. Jobs and loan modifications are the only thing that's going to help this market.
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5-26-2009 @ 2:14PM
toby said...
this is good that the housing market is coming back down to an affordable price. it should have never went that hi nobody can afford it this recession shows it. if everybody just stops buying they will continue to fall. the banks dont need to make that much money.
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5-26-2009 @ 2:21PM
Idea guy said...
It has to be recognized that home prices in many areas had been ridiculously high, so that makes the present drop in prices appear more dramatic than it is. Even a drop back to what should be normal is not being recognized as just that. This applies to other areas of the economy, e.g. If you have five CVS stores within a few miles of each other and two now have to close, that isn't a bad economy as much as it shows idiotic over-extension, and the related job losses are jobs that wouldn't have existed. Some of the economists should try to construct what "normal" would/should now in various markets so we can compare to that.
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5-26-2009 @ 2:31PM
engineer04 said...
Yet more deflation of housing. More still to come in the air being let out of the grossly overinflated tire bubble. So be it. Now with yet more ARM's resetting- coupled with the unemplyment numbers adding to those of people squeezed to the max max max.... this is not yet over. I'm just waiting for more delevering of the mkts. That has yet to come. It will. The 'up' mkts today indicate an awful lot of paper trading and shortselling occurring. And hedge fund activity- pre decline. I guarantee no real stuff in trading going on with low end retail investors. They know better. What with the auto industry at the beg stages of its messy bankruptcy... and California in the tax and housing mess it is.... just the tip of the cold cold iceberg... about to hit a log jam. Sad.
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5-26-2009 @ 2:52PM
ken said...
The prices of house is just falling back to where they should have been before the real estate agent started telling people buy because you can never lose with property.
Just remember these people are sells people. They make a living on their commissions. The higher the price the higher their commission.
Look it up in the dictionary under lair. You will find the following: lawyers, polititians which are just out of work lawyers, used car sell people and the real estate sale people. They are all bottom feeders.
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5-26-2009 @ 3:21PM
Dan said...
You must be a part of the "moron majority" that can't spell cat and hates everybody with any education. Real estate agents and lawyers didn't cause this mess, and they are not all a bunch of "lairs" either.
5-26-2009 @ 11:18PM
Jerry said...
You should learn proper English. You must be a real moron, I got a real laugh reading your comments. I bet you voted for obama.
5-27-2009 @ 12:24AM
Lisa said...
Ken,
Please get your facts straight before putting the blame of the entire housing market on Realtors. I am an experienced Licensed Realtor in NJ and can attest that we are not to blame. As a Realtor we are to uphold high ethical standards and could lose our license along with tens of thousands of dollars in fines for steering our clients into purchasing anything! We are not the ones who approve the loans or tell clients they can afford a whole lot more than they really can. All of my clients MUST have a pre approval letter from a reputable lender before I will ever put them in my car. I am not here to rip anyone off or force them into buying anything. My clients come to me. I do not go door to door or cold call anyone. The lenders at that time, in the height of the market, were allowing ridiculous amounts of money to be borrowed by buyers. Realtors do not have any control over the buyer and the lender. They are told what they qualifiy for, which at that time was too much and we knew it. Try telling someone they should be looking for a smaller home for less money once a lender has given then a pre approval for for more money then they ever imagined. Everyone wanted the big house on the hill at whatever cost. It was a mistake, but when Government is pushing Fannie Mae and Freddie Mac to approve those loans and keep lending at all costs to put kick backs in their pockets..what did they think was going to happen? The blame falls on Dodd, Paulson, and Barney Frank and their co horts. If you want to know who profited the most from all of this...that is the direction you should be looking in. Not a Realtor. If you know anything about the business, you will know that a Realtor does not make all that money. Commission checks are divided in half to both the listing agent and the buyers agent. A franchise fee of up to 8% is then taken out and then the agency gets half of that. The difference in money as you are talking about only adds up to a few hundred more dollars in our paychecks. We are not bottom feeders, as we get the scraps of what is left over after everyone else has their hands in our pockets and we have done all the work, put in all the longs hours, no vacation or days off, 12-14 hour work days, spent money on gas and whatever else we need to do in order to make a living and keep our clients happy. This is my livelyhood and I am highly respected by my clients and colleagues. I take my job seriously and do the best I can for all of my clients no matter what price range they are in. They are all treated equally and with dignity and respect. I take offense to your comments. :et me ask you...When you put in a full work week, do you expect to be paid???
5-26-2009 @ 3:31PM
James said...
I agree. If you have made bad choices while dealing with the so called bottom feeders that is your poor judgment.
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5-26-2009 @ 3:46PM
mark said...
I don't know about anyone else out there, but the downturn is killing my property value and yet the local government has raised property taxes again! How can we stand for much more hammering from every side and not crack? What's it going to take for average, everyday Americans to rise up in anger to stop this out of control Washington/WallStreet alliance that is killing the American Middle Class Dream. I think all they really want is to re-establish the Feudal System of Nobles and Peasants.
This is a great film that explains (in a humorous way) how the economic collapsed based upon subprime derivatives was orchestrated.
http://www.break.com/usercontent/2009/4/SubPrime-Slime-705089.html
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5-26-2009 @ 4:32PM
DANO said...
Has anybody asked Obama how the housing prices are doing in all 57 states? I still can't believe Obama thought there were 57 states. I don't think Obama could find his butt with both hands (unless the teleprompter was with him and told him where to start).
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5-26-2009 @ 8:11PM
michael said...
Question? I am in the biological sciences..and didn't study much economics...
But...Isn't price deflation another word for depression..and if so..why do the so called experts say we are still in a recession?
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5-26-2009 @ 9:18PM
Darryl Eyerman said...
The Newspaper and news says: Everything is out of control, fighting, dying and men do not know in their minds when it will be over. (if ever) In all reality it is not fact when it will be over, It is only an opion or speculation based on history repeating itself. BUT.... The bible speaks clearly....to think on good things. Love, joy, peace, longsuffering, meekness and gentleness. The bible says over and over again....God has everything under control. God has you in the palm of his hand.
Darryl
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5-26-2009 @ 10:16PM
Kimmy said...
I recently looked at properties in an area near me, to see if this housing mess was close by. I was shocked to see, that out of 20 homes recently purchased, within the span of 5 yrs, were upside down by as much as 3 times the just value. Homes that sold for 450,000 were only worth in just taxable value 125,000. So, this mess is far from over, people who refinance, will still walk away, when reality sinks in. Can you imagine the amount of blight, this mortage mess could create?
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5-27-2009 @ 2:57AM
Robert said...
Market trying to find a bottom. Ha Ha Prioces still have a way to go before any bottom is hit. Look at the prices of homes in 1990, maybe even back to 1985, that is the bottom price where hopefully the prices hit and things turn around in housing sales. Suck it up people. For over 10 years the word was out that house prices were inflated, but no one listened. People kept buying, kept refinancing, even buying 2 or 3 homes on speculation of getting big payday with the way house prices were going up. Now everyone it is time to pay the cost of not listening to experts and common sense, of being greedy. Many will be stuck with houses with mortgages more than the value of the house. Time will change things, that is if you were not toooo greedy, values will go up and things will get back to normal, where a house is a great investment, over a LONG period of time. Dummies, if you want to blame someone, look in the mirror.
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5-27-2009 @ 3:46AM
Brian T. S said...
Over valued homes, sold at mega inflated prices by the financial industry...now tumbling down to what they are actually worth...now anything else pulled off in such a manner is just flat out fraud, but for some odd reason, not in the housing industry...the institutions who par took in this scam should take a massive hit and swallow the enormous bitter pill they knew was bad medicine from the start. Refinance at the actual value of the homes once the depreciated price is set, period...and you, Mr. Banker bear the brunt of your self inflicted, greed induced binge of the American Dream. Albeit you caused the nightmare...
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5-27-2009 @ 3:56AM
Josh said...
House prices need to fall even more. In my opinion, the rise in price of housing is what has causes this problem in the first place. This and the price of medical. Prices nowadays are so outrageous that people have to go get loans that they cannot afford to pay back, yet banks will still provide the loans in an attempt to hit people with interest rates. Here's the thing though, my prediction is that, even if/when we recover from this mess, the exact same cycle will repeat itself in another 30-40 years. Prices will become unbearable, Americans will seek loans and eventually, banks will put the kibosh on these loans that people aren't paying back. In terms of medical, it's absurd that it costs a few thousand dollars per day to stay in a hospital when all they do is feed you, give you drugs and pamper you. I could hire a hooker that's gone through first aid/CPR training for less money AND still have enough left over to stay at a 5 star resort with room service (Caviar, even). Funny thing is, is that the hooker would make more than any nurse would.
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5-27-2009 @ 6:51AM
Edhilf said...
Funny I know a real estate person in FL that thinks things are just hunky dory. Talk about a person with their head in the sand, FL is sinking in unsold real estate and I for one still think that swamp is way over priced.
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5-27-2009 @ 5:57PM
David J Hook said...
This recession is the result of pure greed by a small percentage of self serving politicians, bankers and business leaders. I am English and live in the UK, but I have been a regular visitor to the U.S. for nearly 20 years now, spending between 4-8 weeks there each year. I come from a country where we had to accept our decline from world #1 in the 1930's to our current position of around about #6 or less. It was our friend and ally the USA that replaced us as a result of the dramatic effects of World War II. upon our respective economies. Sadly this world-wide recession is now the tipping point for your economy and world ranking. The present crisis from which the USA and UK will recover will nevertheless see each of us move down the rankings. We have become used to this, but for you, losing your position as world #1 to China and the gradual replacement of the mighty dollar by the Yuan as the worlds main trading and reserve currency will be a difficult pill to swallow.. However the sooner this is acknowledged and planned for, the less dramatic the effect will be on the average hard-working American. You must use this recession as the opportunity to revitalise your great country and take back the undue power and influence of politicians, bankers and business leaders who have routinely put their own interests before those of their country. The US has a great tradition of real patriotism which has often been abused by these leaders. Now is the time for patriotism to be the true test of your countrymen who wish to lead. Make sure your leaders both political and commercial are worthy of their position and that they operate in your nations interest not just their own. If you do this you will at least retain world #2 ranking for a good long while, if not the decline
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