Yesterday, data from the most widely-followed US home price index was released and the results were (for lack of a better word) lousy. The Standard & Poor’s/Case Shiller index declined for the eighth month in a row and is at a point at which the housing prices have officially double dipped.
There are a handful of housing indexes out there but the S&P/Case-Shiller index seems to be the one that has the most credibility. The index measures sales of select homes in the 20 largest metro markets. Investors on Wall Street, board members of multinational companies, and Congress all rely on S&P/Case Shiller to give them the most accurate reading for home prices in the US.
In yesterday’s data it showed that home prices in 20 US cities declined 0.77 percent from February to March. More impactful is that the report found that home prices in Q1 of this year are now 2.9 percent below the previous quarterly bottom in Q1 of 2009, effectively giving up all the gains of the past few years. The price index is now at levels not seen since 2006 before the housing market began to collapse.
What’s worse is that this report out today is actually a three month running average based on home sale closings in March. That means that the index is based on sales contracts signed around six months ago and the US has seen considerably more housing weakness since then. Unfortunately, that probably won’t change anytime soon as roughly 92 percent of homeowners say it’s a bad time to sell their home, according to the latest Thomson Reuters/University of Michigan index of consumer sentiment.
The cities with the most significant declines since hitting their peaks are: Las Vegas at -58.61%, Phoenix at -55.91%, Miami at -51.12%, Detroit at -47.21% and Tampa at -46.63%.
Adding to the momentum of this housing price slump are foreclosures and the fact that many homebuyers are having difficulty getting financing for a home. Many economists think that these two factors will continue to prevent home prices from stabilizing for another 12 months and that prices could drop another 5%.
I don’t like to be a “doomsayer” or even a pessimist for that matter but US home prices have now fallen further since the bubble burst a few years ago than they did during the Great Depression! What’s worse is that it took 19 years for the housing market to regain its losses after the Depression ended. I’m not saying that what we experienced in 2008 mirrors the Great Depression (though it could have) but there are enough similarities to raise my concerns.
If you want to know my opinion on if now is a good time to buy residential real estate, check out an article I wrote last year – https://themeshreport.com/2010/08/is-now-the-right-time-to-invest-in-real-estate/
What do you think? Do you think home prices will continue to fall? Would you buy a house now? Are you trying to sell your house now? Please leave your comments below.