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Home Values Plunge At Record Rate

Biggest drop since 1991; Miami leads price decreases

By Martin H. Bosworth
ConsumerAffairs.com

December 26, 2007

Home property values dropped by 6.1 percent after posting a 4.9 decrease in September, according to economist Robert Shiller, co-creator of the price index.

Shiller noted that of twenty metropolitan areas surveyed for the index, all twenty reported record month-to-month price decreases, with 11 of the 20 posting their biggest decreases ever for the month of October. The report was the 23rd consecutive month of home prices declining for major metropolitan markets.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," Shiller said.

Miami led the race to the bottom with a 12.4 percent decrease in home prices from the previous year, followed by Tampa with 11.8 percent. Detroit and San Diego were up next, with respective declines of 11.2 percent and 11.1 percent.

Charlotte, N.C., Seattle, and Portland, Ore., were the only areas that experienced any positive annual growth rates in home prices, according to the report. Charlotte gained 4.3%, Seattle gained 3.3% and Portland gained 1.9%.

The meltdown continues

The report was another grim indicator that the housing slump is far from over.

Record levels of excess unsold inventory, coupled with tightened lending standards from the subprime lending implosion and nationwide spikes in foreclosures, are contributing to a glut of homes on the market that continue to drive prices down.

Financial analysts Moody's predicted that home prices would drop through at least 2009, with prices declining by 30 percent in the most overcrowded markets. Moody's predicted the market would begin to recover in 2010, when rock-bottom home prices would lure buyers formerly priced out of the hot housing market of 1999-2005.

But many homeowners will suffer in the interim, losing the ability to draw out equity from homes combined with soaring credit card debt to force reductions in consumer spending, which will send further shockwaves through the economy and increase the risk of a recession.

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