The Decline in Median House Prices Sets New Record

As Northern Trust's Global Economic Research Week in Review [.pdf] shows, sales of existing homes have increased, on a year-to-year basis, due to the fall in prices. In fact records have been broken in today's housing market, and the records are of house price declines.

The median price of a single-family home was down 8.7%, the largest drop in record.

The data are different though for the sale of new homes. As Paul Kasriel and Asha Bangalore write in the Review:

Sales of new single-family homes fell 1.8% to an annual rate of 590,000 after an upwardly revised 601,000 sales pace in January. Purchases of new single-family homes fell in the Northeast (-40.3%) and Midwest (-6.4%) but advanced in the South (+5.7%) and West (+0.7%). Sales of new single family homes are down 57.5% from the peak pace of 1.389 million homes in July 2005.

The median price of a new single-family home declined 2.7% to $244,100 from a year ago. The January year-to-year drop in the median price (-11.3%) of a new single-family home was the largest on record. Therefore, by comparison, the price decline in February is an encouraging sign.

Kasriel and Bangalore point out that the inventory of unsold new homes has not shrunk, but held steady, and this does not bode well for the sector. Given the large inventory, they write, it will come as no surprise if house prices continue to fall.

Comments

[Nick Gogerty:]

only another 10% to go if prices revert to mean affordability.
nickgogerty.typepad.co...

2008 Apr 02 11:36 AM

[Expat:]

Why only ten percent? During average times, the median house price is about three times income. We are in a recession (at least) and a banking crisis which is severely limiting lending. I would argue that the median house price will move closer to 2.6 times median income.

Median income is about $48k and falling. Do the math, Mr. 10%

2008 Apr 03 12:39 AM

[Yoski:]

In Miami we still have another 50+% to go considering current price levels. That would put us back to 2000 prices. A 1200 sqft 2/1 slum dwelling is still offered (not sold) @ $200K, down from $350K at the peak. Realistically it might be worth $60 - 80K, that's about all you can afford if you make $10/hr and have 2 incomes. Since it appears that sanity has returned to banks lending standards there's absolutely no financing out there for those type of properties unless you have 20% down. Prices still have a very long way to fall here in Miami.

2008 Apr 03 06:36 AM