Can't Keep Home Prices from Falling

Standard and Poor's released the February data for the S&P/Case-Shiller Home Price Indices showing a 12.7 percent year-over-year decline for the 20-City Composite Index, the steepest decline on record. Indices for individual cities are shown below:

David M. Blitzer, Chairman of the Index Committee at Standard & Poor's noted:

There is no sign of a bottom in the numbers. Prices of single family homes continue to drop across the nation. All 20 metro areas were in the red for the February-over-January reading. In addition, 19 of the 20 MSAs are still reporting negative annual returns. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months. On top of that, the declines have remained steep with eight of the 20 MSAs and both composites reporting their single largest monthly decline in February.

In tabular form, the data looks like this:

Three cities now sport year-over-year declines of more than 20 percent - former high-fliers Las Vegas at -22.8 percent, Miami at -21.7 percent, and Phoenix at -20.8 percent. Two areas in the Golden State - Los Angeles at -19.4 and San Diego at -19.2 - look like they're ready to join that club next month.

Charlotte remains the only metropolitan area in the index with a gain from year ago levels with a modest 1.5 percent increase.

Comments

[tom kern]

I don't think it is a factor of lack of confidence,it's just that homeowners are not at the point today to purchase large ticket items.markets tend to follow trends and this happens to be one of them. there is only two things homebuilders can do, and it's either buy and hold til someone buys which is seemingly a low probability with present market conditions.much the same as in the stock market. everyone has their price and threshold. timing, price and need. market availability too.

[WAKEUP]

It's a good idea to keep up with what is going on, just to know where we are. The terrible truth, though, is that houses are going to be pretty cheap, when all the dust clears. (I still think prices will fall AT LEAST 50%, from their top.) The next problem for potential homeowners will be finding financing for that cheap house. It's going to be a completely different world from what we have known for the past fifty (50) years, or so, as far as houses are concerned. And for all the enlightened analyses I read, nobody has yet written anything that seriously indicates any realistic way to keep this from happening.

[Stanley]

"The next problem for potential homeowners will be finding financing for that cheap house."

seems that prices will keep falling until people can get the financing as well as afford the payments. no financing means no transactions happening, which means prices are still higher then the market will bear. This is the opposite of what happened on the way up when excessively loose financing pushed prices way up.