Home Prices Tumble 3.2%
Kurt Brouwer August 28th, 2007
Home prices are falling these days and have been for a year or so. This type of decline is the first we have seen in many years. Update: In general, the coastal regions of the country have had the most bubbly real estate markets (see here and here for more).
Kelly Evans of the Wall Street Journal reports [emphasis added]:
‘The decline in U.S. home prices accelerated in the second quarter as a glut of unsold homes and tighter lending standards continued to weigh on the market.
Home prices nationwide tumbled an average 3.2% from a year earlier, according to an index compiled by Standard & Poor’s Corp. The decline was sharper than the year-to-year decline in the first quarter, when the S&P/Case-Shiller national home-price index dropped 1.6%…’
An index that covers single family homes is, by definition, less precise than one that covers shares of stock in companies. With corporate shares, one share is the same as another. With homes, even in the same neighborhood, there are lots of differences. This index attempts to deal with that by tracking sales of the same home over time. Evans goes on to report:
‘…Mr. Bethune noted that today’s price declines are worse than those during the housing bust of 1990-91 that preceded a national recession. “The housing market is definitely a leading indicator of a potentially more serious downward moment in the economy,” he said.
Among the 20 cities in the S&P/Case Shiller survey, Detroit was the biggest decliner, with the average price of a home there falling 11% from the previous June. The Detroit-area economy continues to suffer from a struggling auto industry and a high concentration of risky subprime loans. “Bubble” regions like San Diego, Tampa, and Washington, D.C., where home prices had risen rapidly during the boom, all decreased by more than 7%…’
Not surprisingly, the biggest loser was Detroit. My home state of Michigan [update: where I grew up] has a stagnant economy, high unemployment and a government that does not seem to grasp the essential elements of economic development.
Update: the coastal areas have seen the most price appreciation generally, so it is not surprising that they would go down more as well. We are also seeing foreclosures rates in those areas soaring as well. However, the data on foreclosures seems to be a bit shaky (see here for more).
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