Several home price indexes show the housing market is likely at its weakest since 1997. The median home price fell by a fifth of a percent - the third straight monthly decline in price - according to the S&P/Case-Shiller home-price index. The data is based on median prices in a cross-section of 20 American cities; the worst declines occurred in San Diego, Tampa and Cleveland. The data concurs with a recent report by the National Association of Realtors, which showed a 3.5% year-over-year decrease in home prices in October. Last week, Dallas Fed President Richard Fisher said the sharp correction in housing may not be over and could even worsen in 2007. Decreasing housing prices can lead to tightening of consumer spending, as consumers borrow less against their existing homes. On a positive note, the fall in prices led to a 0.5% increase in sales of existing homes in October.
• Sources: U.S. Single-Family Home Prices by Metropolitan Area (PDF file), Chicago Tribune, Newsday/AP
• Related commentary: Housing Bubble and Real Estate Market Tracker, Housing Realism Enters the Mainstream Media, New Home Construction Rises, But Inventory Levels Still High, Hovnanian Enterprises Suffers Gruesome Fourth Quarter
• Potentially impacted stocks and ETFs: iShares Dow Jones US Real Estate (IYR), iShares Cohen & Steers Realty Majors (ICF), SPDR Homebuilders (XHB), iShares Dow Jones US Home Construction (ITB)
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