Home Prices Continue To Fall In Urban Areas

The latest news on home prices is not good for homeowners or the housing market in general.

The S&P Case-Shiller Indices show a deceleration in the annual growth rates in 18 of the 20 Metropolitan Statistical Areas (MSAs) and the 10- and 20-City Composites in October compared with what was reported for September 2010.

The 10-City Composite was up only 0.2 percent and the 20-City Composite fell 0.8 percent from their levels in October 2009. Home prices decreased in all 20 MSAs and both Composites in October from their September levels.

In October, only the 10-City Composite and four MSAs -- Los Angeles, San Diego, San Francisco and Washington DC -- showed year-over-year gains. While the composite housing prices are still above their spring 2009 lows, six markets -- Atlanta, Charlotte, Miami, Portland (OR), Seattle and Tampa -- hit their lowest levels since home prices started to fall in 2006 and 2007, meaning that average home prices in those markets have fallen beyond the recent lows seen in most other markets in the spring of 2009.

The bottom line? Perhaps we shouldn't look for a housing recovery in 2011.

Double-dip housing recession

"The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October's report. Home prices across the country continue to fall." says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. "The trends we have seen over the past few months have not changed. The tax incentives are over and the national economy remained lackluster in October, the month covered by these data."

Existing homes sales and housing starts have been reported for both October and November, and neither is giving any sense of optimism, Blitzer says. On a year-over-year basis, sales are down more than 25 percent and the months' supply of unsold homes is about 50 percent above where it was during the same months of last year.

Housing starts are still hovering near 30-year lows. While delinquency rates might have seen some recent improvement, it is only on a relative basis. They are still well above their historic averages, in both the prime and sub-prime markets.

"Looking at the monthly statistics, all 20 MSAs and both Composites were down in October over September. While not always consecutive months, twelve of the MSAs and both composites have posted at least six months of decline since the beginning of 2010," Blitzer said. "In addition 15 MSAs and both composites have posted three consecutive months of decline with October's report -- a further sign that the few months of positive print earlier this spring were only a temporary boost. The seasonally adjusted data tell largely the same story."

Mid-2003 level prices

As of October 2010, average home prices across the United States are back to their mid-2003 levels. Measured from June/July 2006 through October 2010, the peak-to-current declines for the 10-City Composite and 20-City Composite are -29.7 percent and -29.6 percent, respectively.

Both the 10-City and 20-City Composites fell by more than 1.0 percent in October versus September. The 10 City Composite was down 1.2 percent and the 20-City Composite fell by 1.3 percent. All 20 of the metro areas also declined in October compared with  September. Fifteen of the MSAs were down by 1.0 percent or more in October, with Atlanta posting the largest decline of 2.9 percent.

An October index level of 68.86 in Detroit indicates that average home prices are more than 30 percent below their January 2000 values. Las Vegas, Cleveland and Atlanta are just about back to their 2000 levels, with October prints of 100.97, 102.20 and 103.30, respectively.

On a relative basis, Los Angeles, New York and Washington DC have fared best, retaining the most of their mid-2000 price appreciation. Each of these markets is more than 70 percent above their January 2000 levels.