By Staff and Wire Service Reports
Optimists seeking a bottom in the housing market got a good shot of reality on May 26 when the closely watched Standard & Poor's/Case-Shiller National Home Price Index reported that home prices fell at the fastest annual rate ever in the first quarter. However, the pace of month-to-month declines continues to slow.
Home prices tumbled by 19.1% in the first quarter, the most in the 21-year history of the Case-Shiller index. Home prices have fallen 32.2% since peaking in the second quarter of 2006 and are at levels not seen since the end of 2002.
The 20-city index fell by 18.7% in March from the year before and the 10-city index lost 18.6%. Those declines were a bit better than February's and marked the second straight month the indexes didn't post record drops.
No Evidence of Recovery
"We see no evidence that a recovery in home prices has begun," said David M. Blitzer, chairman of the S&P index committee.
All 20 cities showed monthly and annual price declines, with nine setting annual records. Fifteen cities posted double-digit drops and three cities—Phoenix, Las Vegas, and San Francisco—all recorded declines of more than 30%.
Minneapolis posted a 6.1% decline from February to March, and the biggest monthly drop on record for all of the metro area.
Charlotte and Denver home prices had the best performance in March over February, both edging up less than 1%. Home prices in Dallas were flat in March.
"In nominal terms, prices are now back to levels last seen in 2002. In real terms, they are at 2000 levels," said Paul Dales, U.S. economist for Capital Economics in Toronto. "In other words, most of the boom in housing has now been reversed—six years of appreciation wiped out in two years of sharp declines. The unprecedented decline in house prices means that housing is now undervalued, possibly quite substantially."
Dales said that prices may fall another 5% to 10% before bottoming—more if unemployment stays high and incomes start falling.