Standard and Poor’s released data from the September measure of the S&P/Case-Shiller Home Price Indices, one of the best available measures of changes in U.S. housing prices, and let me tell you: It ain’t pretty.
According to S&P, annualized home price gains, which were chugged along at a clearly unsustainable pace of 20.5 percent per year as recently as mid-2004, have slowed to just 3.7 percent a year. That marks the slowest annual appreciation for housing in more than nine years, a record stretching back to mid-1997. S&P, characteristically understated, says that the indexes “show signs of a continued deceleration of home prices.”
A more forthright observer might say that the U.S. housing economy is slamming on the breaks. Robert Shiller, chief economist for MarcoMarkets, the co-producer of the indexes, is just that observer. “Home price gains continue on a downward spiral,” says Shiller. “In September, we saw monthly declines or flat prices in seven of ten metropolitan areas.”
The most important number on that chart may be the bolded number for the Composite index. September marks the second straight month for home price declines on a national basis, according to the Case-Shiller indexes. While annual trends are still up, that’s very much a legacy effect of earlier price gains.
Moody’s, typically on the straight-and-narrow, recently forecast a 3.6 percent decline in national home prices in 2007, in a report called “Housing At The Tipping Point.” Losses locally could be much worse: 18.6 percent in Cape Coral Florida, 17% in Reno, NV, etc. If prices do fall, it will be the first year-over-year decline in median home sales since the Great Depression. The report suggests that prices could continue falling in 2008 and 2009.