Housing Prices Continue to Set New Records - All of Them Bad

As it does every month, Standard & Poor's released the readings for the S&P/Case-Shiller Home Price Indexes. Although the indexes have been around a while, lately they've been getting more attention as housing markets have plummeted.

The reading for September did not deviate from the trend—there were no bright spots in the report. The U.S. National Home Price Index, a quarterly index covering the nine U.S. census divisions, suffered its worst decline in its 21-year history when it fell 1.7% from the second quarter. It was also down 4.5% year-over-year, breaking the record low it set in the second quarter.

The monthly indexes were equally bleak. In addition to 10-city and 20-city composite indexes, an additional 20 indexes are calculated for select major metropolitan areas.

"Most of the metro areas continue to show declining or decelerating returns on both an annual and monthly basis. All 20 areas were in decline in September over August. Even the five metro areas that still have positive annual growth rates—Atlanta, Charlotte, Dallas, Portland and Seattle—show continued deceleration in returns," says Robert Shiller, chief economist at MacroMarkets LLC, and one of the creators of the indexes.

Those same five cities have consistently been among the strongest performers in recent months. However, the other end of the spectrum has been less stable. Detroit, consistently one of the worst performers, is down 9.6%, the same as San Diego. Detroit had dominated the lowest ranking until being overtaken by Tampa just last month. This month Miami joins the other Florida metro area: It is down 10% year-over-year, while Tampa is down 11.1%.

Not only did all 20 metropolitan areas show declines from the previous month, but eight of those metropolitan areas experienced record-low year-over-year returns: Atlanta (0.4%), Chicago (-2.5%), Las Vegas (-9.0%), Miami (-10.0%), Minneapolis (-4.5%), Phoenix (-8.8%), San Diego (-9.6%), Tampa (-11.1%) and Washington, D.C. (-6.6%).

The absence of positive signs in the latest home price index returns indicates we haven't seen the bottom of the trend, and raises the uncomfortable question of whether other areas of the economy may soon follow.

Written by Heather Bell

Comments

[RadioCeleb99:]

Everyday more Economist’s like Robert J. Shiller are expressing concern that the threat of a recession is coming, but there are plenty of other clues that we are facing unprecedented risks. Consider publicly traded Real Estate Investment Trusts (REIT). Over the last few years most REIT’s performed extremely well. But the fundamentals are deteriorating and the trading values that took years to build could potentially be wiped out in as many months by the those nasty stock market vultures and fast buck artists commonly known as short sellers. Take Equity One (ticker: EQY) as an example of the perfect storm. Equity One is traded on the New York Stock Exchange. While Equity One’s exposure is nationwide it is based in Florida and so is a huge chunk of its portfolio. The double whammy facing Equity One is that unlike a diversified REIT it primarily invests in “retail” real estate. Equity One disclosed in the latest supplement to it’s quarterly report that its overall vacancy rate is already over 6%, but the shocker is the fact that the rate almost doubles (to a little over 12% vacancy) when the tenants shop is less 10,000 sq ft. The real danger for Equity One is that this group of tenants represents over 70% of Equity One’s shopping center revenue. When you consider that less than 30% of Equity One’s current shopping center tenants are Anchor’s (defined as having over 10,000 sq ft.) you really get goose bumps because at least the bigger retailers have the capital reserves to weather the storm. …And you thought only Realtors and builders had it bad. 

2007 Nov 27 07:06 PM

[User 130589:]

Thank you to Forrest Gump poster above; I've been considering buying into a REIT or two with prices down, but not now.

I'm always long on my investments and do not want to get into something that can be easily manipulated by the short sellers. Shorting is nothing more than gambling and they should refer to themselves as a "gambler" and NOT as an investor.

Thank God the big boys took them on and Wednesday was not a 50% drop as many of the short sellers were hoping. My understanding is that many of them lost their shirts.

2007 Dec 15 01:18 PM