Through January 2008, declines in the prices of existing single family homes posted record low annual declines.

“Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007,” says 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% growth rate."

I believe that falling prices — along with falling industry — will ultimately be healthy, eventually returning real estate markets to more normalized sustainable levels somewhere off in the future.

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Sp_case_shiller_32508

Graphic courtesy of S&P/Case-Shiller Home Price Indices

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Sp_case_shiller_metro_regions

Table courtesy of TFS Derivatives

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Source:
Record Declines in Home Prices Continued in 2008
S&P/Case-Shiller Home Price Indices
March 25, 2008
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_032544.pdf

Tradition Financial Services, Inc. / TFS Derivatives Corp.
March 25, 2008
http://www.tfsbrokers.com/property_derivatives.html

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Category: Data Analysis, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

36 Responses to “Record Declines in Home Prices Continue”

  1. Dee Leverage says:

    we are slightly closer to the bottom, but still nowhere near it. Wachovia filling the air with ads for pay-option mortgages tells me lessons have not been learned.

  2. Mr. Obvious says:

    Barry, this is GREAT news! It means that houses are become more affordable!

    /cinefoz/

  3. RNL says:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=a4kZQNXUFpW4&refer=home

    “S&P/Case-Shiller Home Price Index Falls Record 10.7% (Update1)

    By Bob Willis

    March 25 (Bloomberg) — Home prices in 20 U.S. metropolitan areas fell in January by the most on record, a sign the housing recession is deepening, a private survey showed today. ”

    BAM!

  4. Organic George says:

    With all the talk about helping people stay in their homes, the real question is why?

    Why hold on to an asset that is declining in value. The Government tries to hold up home prices is like the proverbial pushing against the tide.

    Let the markets find the real value in real estate.

  5. B.B. says:

    The really odd thing now is that, if you have a long view … 12 months more or less, housing as a sector is a good buy. That being said, there are a lot of other places that will pay off much sooner then 12 months from now. And housing will probably, rise, fall and then rise again later over that time.
    I’ll probably consider housing as a sector this summer after the typical mid year dip arrives. It will probably roar after the good news starts trickling in.
    Posted by: cinefoz | Feb 26, 2008 8:12:52 AM

    Always good for a laugh this guy…

    I hate to admit it, but… hearing about those brand new condo’s in Florida for sale for $88,000, makes me think…”HHMM, nice vacation home”… someone talk some sense into me, please!

  6. Dee Leverage says:

    Anyone hoping for real estate to stabilize at these levels is misguided and unrealistic. Stabilizing in still bubble territory is a disaster waiting to happen.

    Shiller House Values

  7. RNL says:

    “U.S. consumer confidence fell more than forecast in March as Americans’ outlook on the economy dropped to the lowest level since Richard Nixon was in the White House. ”

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aQXjcc5vnZsM&refer=home

    Ouch.

  8. wunsacon says:

    B.B., maybe the question is this: would $88k cover your Florida hotel stays the rest of your life?

  9. Jim says:

    B.B.:

    Here’s some sense: Even assuming the price for that new condo has bottomed, let’s say your mortgage for the $88k condo is about $500/month. Add to than your condo fees of what? $200/month? That’s $8,400/year, and doesn’t include property taxes.

    Instead of some tired little condo in Florida, you could take two VERY nice vacations for the same amount of money to, say, Tuscany and New Zealand, and with no maintenance or tax form headaches.

    Of course, if you think the condo is going to double in price soon, go for it!

  10. Pool Shark says:

    The bottom is indeed closer, though not much…

    It’s still a long way ’till I,>2013.

  11. me says:

    “I hate to admit it, but… hearing about those brand new condo’s in Florida for sale for $88,000, makes me think…”HHMM, nice vacation home”… someone talk some sense into me, please!”

    I think Dee is right. I thought the same as you but it is too early. Of course with Florida, it is $88,000 for the condo and $88,000 for insurance and association fees.

    I was reading a response in the WSJ to an article about home prices and the writer said what I often believe is that when prices come back down to 2 1/2 times peoples incomes the market will be stable. That has always been affordable and this business of “growing” into the price bailed out by inflation is just silly.

  12. Jim says:

    Where I live, average house prices are still eleven times average household incomes. If we’re aiming for two and a half, we have a LOOOONG way to go.

  13. michael schumacher says:

    OT:

    Put premiums for almost all financial stocks are OUTRAGEOUS…

    MS currently at 49 Oct ’08 25 Put is over $2
    The “implied” cost of MS stock in that Put is 24.

    Absolutely INSANE however the CBOE has always had it’s own boat to float with regards to pricing options….they know it’s not going to be profitable so let’s just make the cost prohibitive.

    MS stock could get cut in half and that Put ‘could’ stay right where it’s at since you’ve already had the pleasure of paying a huge premium for 7 months of time.

    Ridiculous…

    Ciao
    MS

  14. ron says:

    The market is moving to a sustainable level in sales velocity around 4.0 to 4.5 million units (SFH). With a consumer recession followed by years of slow growth the RE market will continue to be a source of foreclosures, BK and disappointment for investors. The 11 trillion dollar mortgage debt incurred by Americans with much of that inflated refi spent on consumer lifestyles we cannot expect a normal return to business from this market.

  15. B.B. says:

    Wunascon, Jim, Me,

    whew,thanks guys..

    I sold my California McMansion in Oct 2005, and moved out of state. I have been bearish on housing since. But, there will come a time, when good deals are to be had. I originally thought 2009/2010. Prices just dropping faster than even I thought.

  16. blin says:

    Remember, all bubbles deflate back to the price levels near the beginning of the mania…unless somebody could show me otherwise. There may be exceptions to the rule. In this case maybe the FED could be successful by inflating out of this mess, but I doubt it.

    Therefore, if someone could provide a chart of the home prices over the last 6-7 years, that would be a good starting point. Expect home prices to retreat all the way back to the base of the move.

    The bottom of a bubble occurs when just about everybody gives up on the asset.

    There still has to be a sort of capitulation in the housing market. I don’t think we’re there yet. Also the banks probably have to tighten their lending practices even more.

    If anybody could find a chart of national home prices for this decade and post it…that chart would probably give us very valuable information regarding the expected bottom of the bubble than any other single piece of information

  17. michael schumacher says:

    B.B.-

    I have no doubt that, at some point, deals will be very attractive however if no one qualifies how “sweet” is the deal?

    With the wild,wild,west running the markets I have a feeling that since the banks already own these “gems” the prices will not decline to a level where it will be anything based on reality. There will be a few deals but the system already owns most of them at this point……I do not see big % drops because of that fact. Take a look around…..even homeowners who are vastly underwater STILL refuse to budge on price.

    Mexican stand off at it’s finest…

    Ciao
    MS

  18. There is now way Fannie Mae and Freddie Mac can sustain price declines in real estate of this magnitude (according to my calculations).

    http://benbittrolff.blogspot.com/2008/03/sarcastic-rant-on-fannie-and-freddie.html

  19. rob says:

    There is cheap and then there is cheap. I had estate planning clients who bought a nice condo in palm beach county in 1992 for $25k … true it was far from the water but it was perfectly servicable.

    In 1998 you could by a one-bedroom condo on the ocean in south palm beach for under $90.

    I don’t expect to see those prices or close to them again, but when condo and townhouse prices hit bottom they will probably flatline for 5 to 10 years.

  20. rob says:

    A lot of the cheaper condos in florida on the market now are apartment conversions, waste of money.

  21. Stuart says:

    The annualized 3 month (quasi delta proxy) are stunningly bad. Down over 30% in many cases e.g. San Fran. Home prices are accelerating downward. Kiss that collateral good-bye = exponentially more stress on the balance sheets of the financials = Financials are total value traps.

  22. FN says:

    Seems to me it’s a great time to buy OR sell a house!!

  23. Andy Tabbo says:

    Just buy it. Very negative news today and stocks are not going down. The S&P target zone is 1430-1454….don’t fight the bounce….but don’t believe in it either.

    AT.

  24. michael schumacher says:

    wunascon-

    who’s who in that “triumvirate”

    Ciao
    MS

  25. blin says:

    AT, I’m with you.

    Although I’m thinking S&P 1410 +/- 15 points.

  26. Dee Leverage says:

    Therefore, if someone could provide a chart of the home prices over the last 6-7 years, that would be a good starting point. Expect home prices to retreat all the way back to the base of the move.
    _____________________________________
    Scroll up..I did it earlier…absolute bare MINIMUM drop I will consider is 40% from today’s level.

  27. Boiled Frog says:

    A lot of the cheaper condos in florida on the market now are apartment conversions, waste of money.

    Posted by: rob | Mar 25, 2008 11:42:01 AM

    Bingo…Here in Tampa over the last few years you could drive past an intersection near an apartment complex without some guy waving a sign about luxury condos. I wonder what will happen to all those apartment complexes now?

    Also, those guys with the signs have all been replaced by new signs for getting out of debt… quite a microcosm down here.

  28. blin says:

    Dee,

    I have seen that chart before…that is probably ok, it just has to be updated…it is about a year behind.

    It’s a good chart since it is adjusted for inflation.

  29. rob says:

    Hi Boiled, I’m over in St. Petersburg so we are seeing a lot of the same things.

    Was not surprised that those Channelside condos went under, me and my friends had been predicting it for two years.

  30. JustinTheSkeptic says:

    Time to buy the home builders! lol

  31. Dee Leverage says:

    Blin,

    I updated it in my head…it probably hit 205 and now sits at 180 or so…has to get to 110 to still be at high levels (40% drop). To get to an average market, it has to drop 50%…if it overshoots, it will drop 60%.

  32. Boiled Frog says:

    Hey Rob – I read a post a couple of days ago from a guy from Seattle asking how we could be in a recession when there are all these cranes putting up new buildings. It made me think about those Channelside condos. There is still a ton of work being done around town. I can look out my window at Rocky Point and see a crane right now.

  33. blin says:

    Dee,

    I found a chart that speaks volumes.

    We still have along way to go to the bottom.
    Prices should decelerate for the next couple years… speculators should stay away unless the deal is too good to pass up.

    http://bp0.blogger.com/_pMscxxELHEg/R-k6W9DCIVI/AAAAAAAABwo/HTSDDSu1vKk/s1600-h/CaseShillerRealJan2008.jpg

    .

  34. Paul Jones says:

    When it is cheaper to buy than to build new, prices will stabilize.

  35. Bob A says:

    I don’t know about other areas but I do no that asking prices on a lot of unsold new homes in the greater Microsoft area near Seattle dropped 10% last week after the Bear Stearns debacle.