The S&P/Case-Shiller Home Price Indexes for August were released this morning. Although nobody was expecting good news, the decline was pretty extreme. Look back over the past several months, and the words "slow-motion apocalypse" might come to mind. OK, maybe not those exact words, but probably some that are pretty similar.
The 10-city composite index recorded an annual decline for August or 5.0%, its biggest drop since June 1991, and not far from April 1991's record decline of 6.3%. Meanwhile, the 20-city composite was down 4.4% on an annual basis. August represents the 21st consecutive month of decelerating annual returns and the eight month of negative annual returns.
Sixteen out of the 20 cities in the 20-city composite saw declines for the month of August versus just 10 for the month of July, and 15 of those cities are in negative territory for the one-year period. The worst off on an annual basis include Tampa, down 10.1%; Detroit, down 9.3%; San Diego, down 8.3%; Phoenix, down 8.0%; and Miami, down 7.8%. Only Seattle (up 5.7%), Charlotte (up 5.6%), Portland (up 2.8%), Atlanta (up 0.5%) and Dallas (up 0.8%) remain in positive territory, although Seattle, Portland and Phoenix declined for the month of August.
MacroMarkets LLC Chief Economist Robert Shiller, who is one of the creators of the indexes, said that there is no sign of a turnaround or a slowdown in the declines.
"Year-over-year and monthly price returns are continuing to either move deeper into negative territory or are experiencing persistent diminishing returns. There is really no positive news in today's report, as most of the metro areas are showing declining or vanishing returns on both an annual and monthly basis," Shiller added.
Statements from other market experts are equally gloomy. Mark Zandi, chief economist at Moody's Economy.com, was recently quoted in an Associated Press article as predicting another 12 months of grief for the housing market, with weak sales, falling construction and lower home prices. And former Federal Reserve Chairman Alan Greenspan recently told attendees at a conference in Bermuda that there was a ways to go before the housing industry cut its inventory enough for a home price recovery.
Meanwhile, the U.S. Congress Joint Economic Committee recently published a report that suggested 2 million homes could go into foreclosure through 2008 and that as much as $71 billion in housing wealth could be destroyed. Although the Department of Commerce says new home sales rose 4.8% in September, the actual number of sales was more than 23% below the prior-year period.
Moreover, sales of existing homes for September, as calculated by the National Association of Realtors [NAR], fell an unexpectedly severe 8.0%. NAR's figures for August indicated a 4.3% decline in comparison with the 4.4% decline for the S&P/Case-Shiller 20-city composite index. Although the measures are not calculated in the same way, the NAR numbers indicate that it is likely the S&P/Case-Shiller Indexes will show further significant deterioration next month.
In other words, there's no end in sight.
Written by Heather Bell