U.S. Home
Prices Fall
For First
Time Since
1991
By Rex Nutting
From MarketWatch
U.S. home prices
dropped 1.4% in the
first quarter compared
with a year earlier, the
first year-over-year
decline in national home
prices since 1991,
according to the
S&P/Case-Shiller index
released Tuesday.
A year ago, home
prices were rising at an
11.5% pace. Prices have
been falling for the
past three quarters.
The Case-Shiller
indexes cover three
geographical areas. The
national index is
released quarterly,
while the 10-city and
20-city indexes are
released each month.
The 10-city Case-Shiller
price index fell 1.9%
year-on-year through
March, while the 20-city
index dropped 1.4%. The
10-city index has fallen
nine months in a row,
while the 20-city index
has fallen for eight
straight months.
All three Case-Shiller
indexes show continued
deterioration in home
prices. Prices were
falling or rising slower
in most U.S. cities.
The national decline
"is reaffirmation of the
pullback in the U.S.
residential real estate
market," said Robert
Shiller, chief economist
for MacroMarkets LLC,
and co-inventor of the
index.
"This fall is
consistent with the
ongoing trend that has
developed over the past
year," wrote Goldman
Sachs economists, who
said they believe the
Case-Shiller index is
the best gauge of home
values. "We remain
comfortable with our
forecast of house prices
falling by 5% over
2007."
Falling home prices
have squeezed many
borrowers who have been
able to extract equity
from their homes or
refinance their loan to
avoid a sudden increase
in mortgage payments as
their adjustable-rate
loan reset.
As a result of
falling prices,
foreclosures are rising
nationally, especially
in regions with a weak
economy, such as the
Midwest, and in the
bubble regions of
Southern California,
Florida, Nevada and
Arizona.
Thirteen of 20 cities
in the Case-Shiller
index have seen falling
prices in the past year,
led by Detroit (down
8.4%) and San Diego
(down 6%). Home prices
rose 10% in Seattle,
7.4% in Charlotte, N.C.,
and 7% in Portland, Ore.
Prices in Phoenix and
Las Vegas, Nev., have
fallen the furthest from
their peak. After
growing at a 49.3% pace
in September 2005, home
prices in Phoenix are
now down 3%
year-on-year. In Las
Vegas, price gains went
from 53.2% in September
2004 to negative 1.6% in
March 2007.
Among other major
cities tracked by the
index, home prices are
down 4.9% in Boston,
down 4.8% in Washington,
down 3% in Tampa, Fla.,
down 2.4% in Cleveland,
and down 2.3% in San
Francisco. Prices fell
2% in Denver, 1.9% in
Minneapolis, 1.4% in Los
Angeles and 1.1% in New
York.
In addition to the
price gains in Seattle,
Charlotte and Portland,
prices rose 2% in
Atlanta, 1.6% in Dallas,
1.3% in Chicago and 1%
in Miami.
The Case-Shiller
index is considered a
superior gauge of home
prices compared to the
median sales-price data
released by the Commerce
Department or National
Association of Realtors,
because it tracks
multiple sales on the
same property and is
therefore not influenced
by a different mix of
homes sold in a period.
Unlike the price
index produced by the
Office of Federal
Housing Enterprise
Oversight, the Case-Shiller
index does not include
refinancings. And, also
unlike the OFHEO index,
it includes homes with
mortgages larger than
the conforming limit of
$417,000.
The OFHEO index for
the first quarter will
be released on Thursday.
Through the fourth
quarter, home price
gains had slowed to 5.9%
year-on-year from 13.3%
a year earlier. The
OFHEO purchase-only
index (which excludes
refinancings) had risen
4.1% year-over-year.
Lehman Bros.
economists said their
forecast for a 0.5% gain
in the first-quarter
OFHEO price index
remains on track. That
would put the
year-over-year gain at
4%.
Source:
www.realestatejournal.com
Email your
comments to
rjeditor@dowjones.com.
-- June 01, 2007
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