Home Prices Dropped in November in Most US Cities

Home prices dropped in November in most U.S. citiesWASHINGTON (AP) - U.S. home prices fell for a third straight month in nearly all cities tracked by a major index. The declines show that most homeowners are not reaping the benefits from some signs of an improving housing market.

Prices dropped in November from October in 19 of the 20 cities tracked, according to the Standard & Poor's/Case-Shiller home-price index released Tuesday.

The biggest declines were in Atlanta, Chicago and Detroit. Phoenix was the only city to show an increase.

The decline partly reflects the typical fall slowdown after the peak buying season.

Still, prices declined in 18 of the 20 cities in November compared to the same month in 2010. Only Washington and Detroit posted year-over-year increases. Prices in Atlanta, Las Vegas, Seattle and Tampa fell to their lowest points since the housing crisis began. And prices have fallen 33 percent nationwide since the housing bust, to 2003 levels.

"The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand," said David M. Blitzer, chairman of the S&P's index committee.

The Case-Shiller index covers half of all U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The November data are the latest available.

Home values remain depressed despite some hopeful signs at the end of last year.

Sales of previously occupied homes rose in the last three months. Homebuilders are more optimistic after seeing more people express interest in buying this year. And home construction picked up in the final quarter of last year, which helped housing contribute to broader economic growth.

Home prices tend to follow sales, which are still below healthy levels. And a large number of vacant homes are sitting idle on the market, which means prices will likely stay unchanged for several years, said Paul Dales, senior U.S. economist at Capital Economics.

"The most likely scenario in the U.S. is that in 2012 prices will bob around a bit, with one month's gain being reversed the next month," Dales said. "But in general, over the next couple of years, house prices will do nothing more than remain broadly stable." Dales said prices might not rise consistently until 2015.

Economists say home prices are likely begin rising first in hard-hit cities in Arizona, California, Florida and Nevada.

Conditions are also improving for those in position to buy a home. Job growth is up, prices are down, mortgage rates are at record lows and rental prices have risen sharply since the housing bust.

Still, many people can't afford to buy or are unable to qualify for mortgage. Some people in position to buy are holding off, worried that prices could fall even further.

A full housing recovery could take years, economists say.

Many economists say the U.S. could be experiencing what similarly occurred in Britain in the 1990s, when it took four years for home prices to rise again after falling prices left homeowners with little financial equity in their homes.

Prices could also fall further once banks resume millions of foreclosures. They have been delayed because of a government investigation into mortgage lending practices that has dragged on for more than a year. Foreclosures and short sales - when a lender accepts less for a home than what is owed on a mortgage - are selling at an average discount of 20 percent.

A deeper recession in Europe could also cause U.S. banks to tighten their lending standards, causing home sales and prices to drop.

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WOW- what a tough last 4 years in housing, the last three in a recession-like economy (if not a Great Recession like it felt). Foreclosures, people in homes “underwater”(owing more than the home is worth), ghost inventories, people in default, government programs which didn’t work, robo-signing by banks which are impersonal enough, government officials pointing fingers at everyone except themselves, etc.
That we HAVE a housing market is saying something. That it is in disarray still says even more. That we haven’t found a true balance or a way out of these inventories/foreclosures speaks to a lack of ideas and leadership. That we are all over the map speaks to the fact there are too many hands in the pie for the markets to behave like the self-cleansing mechanisms that they are- part for good reasons, part for bad.
The good news about people getting in the way of true market mechanics is that home prices are higher now than they should be- period.
The bad news about people getting in the way of true market mechanics is that uncertainty is much higher that it should be- period.
The unfortunate thing is they both go hand-in-hand. Let the markets fall and it would be short term painful, but long term certain. Prop the markets up buys time, but at the unrelenting price called uncertainty. I have a different direction for us to take.

Idea- The government (yes, I said it) could actually do some good- either directly or indirectly. They need to mandate the demolition of some of the housing glut. That is right- tear them down literally. By removing excess inventory (say 1 in 20 on banks books) the housing prices would stabilize at current or higher levels. The inventories would need to be accounted for, so as not to impact banks capitalization overall. The demolition could be considered an anti-infrastructure play. It would create demolition jobs, help home prices(start to relieve some pressure on underwater homes sooner), eventually create new jobs in construction at a much sooner point in time, remove some blights in neighborhoods(condemned buildings, vandalized homes, eyesores which are unkempt, etc.), and create tremendous certainty earlier in time moving forward.
Remember- we are in a time of a ‘new normal’, where the economy will not grow as quick as it has historically, where homes will be unloaded by boomers more so going forward- not less, where there are less home buyers coming into the market than are leaving, where most former home owners will not qualify for a mortgage for some time to come.

Idea- What about a one year moratorium on NEW home construction? You could buy a home and remodel, or you could wait (maybe pay a one-time surcharge)? The point would be this. With enough homes on the market and then some, why would we allow more homes to be built at a time when we cannot support the current home price as is? Why not make them pay-up for it OR not do it? If the argument is we would lose construction jobs, then who would do the remodeling? The sooner we settle out home prices, the sooner we can return to “normal” and the sooner REAL construction pricing and jobs return. My cousin (who has done construction on the West coast for 20 plus years says he doesn’t see construction coming back for a long time- 10 years was his number).

Side note- We will come to a point where we will need to forgive the current credit issues at a pace unheard of in history. Just planting that seed now, but it will be part of the ultimate solution. And yes, it means the very people who overstretched before and helped create this mess will benefit earlier than they should. Get over it; I have- since we will need them involved productively in our society as consumers and home owners to make it all work.

More Ideas at FixTheNation.com

January 31 2012 at 10:56 AM Report abuse rate up rate down Reply

no job equals no house

January 31 2012 at 10:41 AM Report abuse +3 rate up rate down Reply
1 reply to captmerit's comment

Cap... no president = Obama

January 31 2012 at 2:02 PM Report abuse +2 rate up rate down Reply