Home prices in worst decline in 20 years
A much-watched report Tuesday showed U.S. home prices declining at their fastest pace in two decades, signaling that the nation’s housing slump was worsening during what is normally the best time of year for residential real estate.
Home prices dropped 3.2 percent in the second quarter compared with the same period last year, according to the S&P/Case-Schiller quarterly index, which tracks existing single-family home price trends in major metropolitan areas.
It was the worst decline in the 20 years since the price barometer was inaugurated, said Robert Shiller, chief economist for MacroMarkets, a division of Standard & Poor’s that calculates the index.
“The pullback in the U.S. residential real estate market is showing no signs of slowing down,” said Shiller, who was among those who forecast the end of the late 1990s stock market boom.
The broad weakness evident in the nation’s housing market is expected to intensify pressures on the U.S. economy. Still, the accelerated rate of decline in the Case/Shiller report “was not a surprise, given the recent downward trends in existing home sales, rising inventories and tightening credit conditions through the end of the second quarter and in the month of July,” said Brian Bethune, an economist with research firm Global Insight of Lexington, Mass.
Yet the rapid deceleration, he said, serves as a “sobering reminder that the nation’s housing market was already on the ropes even before” world credit markets were thrown into a tailspin this month because of escalating mortgage delinquencies. In the month of June, 15 of the 20 U.S. markets tracked by the index showed declines, including a 4.1 percent drop in Los Angeles, a 7.3 percent decline in San Diego and a 4.0 percent decline in San Francisco. Other areas fared significantly worse, particularly in Detroit where prices plunged 11 percent. Phoenix suffered a 6.6 percent drop, and home values in Las Vegas were down 5.1 percent in June versus a year ago.
By comparison, the Pacific Northwest is strong – with prices rising 7.9 percent in Seattle and 4.5 percent in Portland. Charlotte, N.C., rose 6.8 percent. Dallas and Atlanta were both up 1.6 percent.
“We’re getting different pictures as to how dire things are,” said Raphael Bostic, an economist and University of Southern California professor. “I think the general picture says that things aren’t great, but that the sky hasn’t fallen in quite yet, certainly not in Southern California.”
He said homeowners should be more concerned with economic fundamentals, such as whether there is job growth in the region, than monthly or quarterly swings in real estate trends.
“These short-term flucuations, while significant, won’t touch people on a day-to-day basis,” Bostic said.
“For the average homeowner, if you’re not looking to sell, try as much as you can to not think about this stuff,” he said.
But it could be hard for people to disregard the onslaught of negative housing-related news.
The federal goverment is expected to report Thursday that the U.S. median home price fell for the first time since it began keeping statistics since the 1950s.