Latest Case-Shiller Numbers Show Steep Slide
Continue Reading Add comment November 25th, 2008
The S&P/Case-Sheller index came out today and the news is not very good. In the national index, prices were down 16% from the third quarter 2007 to the same period of this year. Prices overall are back to 2004 levels, erasing four years of gains. From the peak in the second quarter of 2006, prices are down 21% nationally.
The trends are different from one part of the country to another, however. The Sunbelt cities that had the largest gains have had the largest decline–Miami, Los Angeles, Phoenix, and Las Vegas. “A pattern we’ve seen consistently and if anything has become more pronounced,” notes David Blitzer, the index committee chairman at Standard & Poor’s. Blitzer noted that those cities were the ones where most of the subprime and creative mortgages were used. San Francisco is an extreme example of this. Higher priced homes have fallen less severely than low priced ones.
Detroit is one exception to the Sunbelt trend. It’s also the only city where housing prices are lower than where they were eight years ago.
The firm also introduced condo data for five cities—Los Angeles, New York, San Francisco, Chicago and Boston. Patterns are very similar to that of homes, substantial declines, more so on the West Coast. Homes have actually dropped more steeply in some markets such as San Francisco.
Wellesley College Professor Karl Case said “there’s no hiding from the bad news.” And it will likely get worse because the recent unemployment, credit crunch and panic on Wall Street has yet to hit the numbers. If there’s a glimmer of hope, he said, there are a bunch of cities including Boston, Chicago, New York, Atlanta and Seattle where prices are only down 10% or less. “Hardly a freefall in three years,” he said.
Individual cites are often a tale of two markets—one is the bank-owned home auction market, where prices have crashed dramatically. The other is markets where prices are even up. Case said the firm has considered dropping auction sales from the data. “If you look at the bottom end of the market, prices literally tripled,” he said. “If those are in there on the way up and you take them out on the way down, you get a biased view.”
A lot will depend on how the market responds to the various government-sponsored mortgage relief plans. “There’s a danger if you do that in too generous a way, people who have performing mortgages get angry, if they see their neighbor getting a break,” Case said. “It could be fairly easy to talk 3 million more into non-performing if they think they’ll get a hair cut. It’s a moral hazard.”