S&P/Case Shiller Home Price Index

S&P/Case Shiller Home Price Index Reveals Largest Drop In 20-Year History

By RTT Staff Writer | 27 May 2008

(RTTNews)— Home prices plunged at a record pace in the first quarter, data released on Tuesday showed. The S&P/Case-Shiller national home-price index— a closely-watched gauge of housing prices— revealed a 14.4 percent decline from last year. This was the largest drop in the two-decades since the index began recording home prices in 1988. The quarterly index covers the nine U.S. Census divisions. A separate index examining 20-cities around the United States also revealed a decline of 14.4 percent in the first quarter. That index is only 7 years old, making this decline the steepest since its inception in 2001. A smaller, older 10-city index plummeted 15.3 percent— the most in its 20-year history.

David Blitzer, Chairman of the Index committee at Standard & Poor's, commenting on what he called the "steep downturn in residential real estate," adding that "there are very few silver linings that one can see in the data." "Most of the nation appears to remain on a downward path, with 19 of the 20 metro areas reporting annual declines, and six of those now at negative rates exceeding -20%," Blitzer said. The weakest market remains Las Vegas, with an annual decline of 25.9 percent. It is followed closely by Miami and Phoenix, with declines of 24.6 and 23.0 percent, respectively.

On an annual basis, Charlotte is the only market in the 20-city index to see an increase in home prices from last year, gaining 0.8 percent. Fifteen of the 20 metro areas surveyed are reporting record lows, Blitzer said. Eleven of those 20 are in double digit decline. A small dose of good news came from Charlotte and Dallas, which saw monthly price appreciation for the first time in seven months. Charlotte was up 0.2 percent in March over February, and Dallas was up 1.1 percent.

On a month to month basis, nationwide home prices dropped 2.2 percent from February to March, the index showed. The news is the latest in a series of reports that hint at continued problems for the housing market, which is said to be in its worst slump since the Great Depression. Last week, a report from the Office of Federal Housing Enterprise Oversight revealed that U.S. home prices plunged at a record pace in the first quarter. U.S. home prices saw their sharpest decline in the 17 years since the government began tracking home data. OFHEO's seasonally-adjusted purchase-only house price index fell 3.1 percent from last year, and declined 1.7 percent from the fourth quarter— the largest quarterly drop on record. Between the third and fourth quarters of 2007, home prices fell 1.4 percent.

"These substantial home price declines bring positive and negative news," said OFHEO's Managing Director James Lockhart said in a statement. "For homeowners and financial market observers, these declines spell further erosion in home equity levels and potentially more trouble for mortgage markets," he explained. "To prospective home buyers who have been shut out of homeownership because of affordability constraints, these declines may be welcome news, as are continued low mortgage rates." The lingering supply overhang is forcing prices down, the OFHEO's Chief Economist Patrick Lawler said.

"The large overhang of real estate inventory awaiting sale continues to force price declines in many areas, but particularly in places that had seen very sharp appreciation in previous periods," he said in a statement. Last week, Federal Reserve Vice Chairman Donald Kohn warned of further problems for the housing market. "The demand for housing continued to decline early this year, and sales could fall even further in coming months, given the tightness in mortgage lending," he said. The housing market could see further decline, Kohn said, although he noted that eventually low prices will likely lead to increased demand.

"All prominent measures of house prices are now showing declines," he noted. "Although lower prices would eventually help bolster housing demand, the expectations of further declines in prices may currently be exacerbating the difficulties in housing markets." Specifically, Kohn cited the lingering overhang in supply which has weighed heavily on the housing market, dragging down home prices across the country. "The supply of existing homes on the market also remains quite high and is likely to be augmented in coming months by rising foreclosures," he added. "As a result, further cuts in construction appear to be in train."

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Normxxx    
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