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Home Values Plunge 14.1 Percent In First Quarter

But new home sales increase for the first time in six months

By Mark Huffman
ConsumerAffairs.com

May 27, 2008

The decline in the S&P/Case-Shiller U.S. National Home Price Index – which covers all nine U.S. census divisions – reached well into double digits, recording a 14.1 percent decline in the first quarter of 2008 versus the first quarter of 2007, the largest in the series 20-year history.

Sales of new homes, however, increased for the first time in six months.

As a comparison, during the 1990-91 housing recession the annual rate bottomed at -2.8 percent. The 10-City and 20-City Composites also set new records, with annual declines of -15.3 percent and -14.4 percent, respectively.

"The steep downturn in residential real estate continues," said David M. Blitzer, Chairman of the Index committee at Standard & Poor's. "There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path, with 19 of the 20 metro areas reporting annual declines, and six of those now at negative rates exceeding –20 percent."

The returns show that 15 of the metro areas are also reporting record lows, and eleven are in double digit decline, with Chicago being the latest metro area to join these ranks. The monthly data paints a similar picture, with 18 of the metro areas reporting at least seven consecutive months of negative returns.

"For the first time in as many months, we finally saw monthly price appreciation in two of the metro areas – Charlotte was up 0.2 percent in March over February, and Dallas was up 1.1 percent," Blitzer said.

Las Vegas remains the weakest market, reporting an annual decline of -25.9 percent, followed by Miami and Phoenix at -24.6 percent and -23.0 percent, respectively.

Charlotte, in fact, is the only market with appreciation over the past year, returning +0.8 percent. In March, half of the MSAs and both composites fell by more than 2 percent over February.

Miami was the worst performer, returning -4.5 percent. Dallas and Charlotte were the only two MSAs to provide positive returns for the month. Overall, the markets that grew the most during the recent real estate boom are the ones that are leading the current decline.

New homes start to sell

After months of sagging sales, U.S. homebuilders were able to draw more buyers into the marketplace in April. The U.S. Commerce Department reports sales of new homes posted an increase for the first time in six months.

The biggest rebound came in the Northeast, where sales were up a whopping 41.7 percent. The Western U.S., hard hit by foreclosures, also saw a sales increase in April, with transactions rising over eight percent.

That doesn't necessarily mean the housing slump is over however. The 3.3 percent rise in activity remained near its lowest level in 17 years.

The good news for April was also tempered by revised numbers for March. After another look at the data, government economists have concluded that March sales were down 11 percent, to an annual rate of 509,000 units. That's the most anemic showing since April 1991.

While sales were up, prices were down. Buyers in April were able to find some bargains, with the median price of a new home down 4.2 percent, to $246,100.

The outlook for home sales, both new and existing, remains weak in the months ahead. Economists say the housing industry is still strolling with falling prices, while foreclosures have not yet peaked. As a result, the market remains glutted with homes, providing prospective home buyers more leverage to make an attractive deal.

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