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Urban Home Values Plunge In January

Home prices in some areas down nearly 20% in two months

By Mark Huffman
ConsumerAffairs.com

March 25, 2008

The S&P/Case-Shiller home price index fell 10.7 percent in January, following a nine percent drop in December. Home prices, as tracked by the respected survey, have fallen in the last 13 months.

While economists are quick to point to both surveys as evidence the housing recession is getting worse, industry analysts have long suggested that prices must fall before the market can recover. They say that after any kind of market bubble, sellers must "capitulate," accepting lower prices for their assets, before new buyers will move into the market.

While signs of capitulation may come as good news, there may be some bad news lurking in the report. The market may not have yet hit bottom.

Analysts say home prices will likely fall further as foreclosures put more and more homes on the market. At the same time, with lenders tightening their rules, fewer people can qualify for loans. Banks worried about liquidity have sharply curtailed all types of lending, keeping larger cash reserves.

Data through January show declines in the prices of existing single family homes across the United States, with 16 of the 20 reporting metro areas posting record low annual declines, of which 10 are in double-digits.

"Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007," said David M. Blitzer, Chairman of the Index Committee at Standard & Poor's.

"Home prices continue to fall, decelerate and reach record lows across the nation. No markets seem to be completely immune from the housing crisis, with 19 of the 20 metro areas reporting annual declines in January and the remaining – Charlotte North Carolina – eking out a benign 1.8 percent growth rate.

"Looking deeper into the data, you can see that 16 of the metro areas are also reporting record low annual growth rates. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking five consecutive months. On top of that, the declines have increased through time, in general, as 13 of the 20 MSAs reported their single largest monthly decline in January," he said.

Las Vegas and Miami share the dubious title of the weakest markets in January, reporting double-digit annual declines of 19.3%, followed by Phoenix at -18.2%. In January, Washington and Minneapolis slipped into negative double-digit territory with annual returns of -10.9% and -10.0%, respectively.

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