Home-price index hits lowest point since 2002
WASHINGTON – An index of home prices in big metro areas has reached its lowest level since 2002, driven down by foreclosures, a glut of unsold homes and the reluctance or inability of many to buy.
Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor’s/Case-Shiller 20-city index. And prices in a dozen markets have reached their lowest points since the housing bubble burst in late 2006.
The nationwide index fell for the eighth straight month. Prices have now fallen further since the bubble burst than they did during the Great Depression. It took 19 years for the housing market to regain its losses after the Depression ended.
Prices rose last summer, fueled by a temporary federal home-buying tax credit. But they’ve plunged since then. This month’s report marked a “double dip in home prices across much of the nation,” said David Blitzer, chairman of the Index Committee at Standard & Poor’s.
After adjusting for inflation, the home-price index has sunk to a level not seen since 1999.
Many economists think prices nationally will drop at least 5 percent more by year’s end. They aren’t likely to stop falling until the glut of foreclosures for sale is reduced, employers start hiring in greater force, banks ease lending rules and would-be buyers regain confidence that a home purchase is a wise investment.
“Folks are having so much difficulty in getting financing for a home,” said Mark Vitner, senior economist at Wells Fargo. “It may be early next year before prices hit bottom.”
Another obstacle to a rebound in prices: A delay in processing foreclosures. Homes in foreclosure sell for, on average, 20 percent discounts. When they do, they pull prices down further. But many foreclosure sales have been delayed while federal regulators, state attorneys general and banks review how those foreclosures were carried out over the past two years.
Once those homes are eventually foreclosed upon, they will trigger a further price drop in many markets. Those declines are “etched in stone,” said Patrick Newport, U.S. economist at IHS Global Insight.
The 12 cities now at their lowest levels in nearly four years are: Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland and Tampa.
Minneapolis fared the worst in March; prices there fell 3.7 percent. They dropped 2.4 percent in Charlotte and Chicago and 2 percent in Detroit. But prices rose 0.1 percent in Seattle and 1.1 percent in Washington, D.C. The nation’s capital is the only metro area in the index where prices have risen in the past year.