Home Prices Continue to Fall


The 20-city S&P/Case-Shiller home price index sets a new record for decline, down 18.2% in November from a year earlier

Real estate prices show no sign of bottoming out. The Standard & Poor's/Case-Shiller home price index, a closely watched indicator of home prices, reported on Jan. 27 that prices of existing single-family homes in 20 major metro areas continued their rapid descent in November, down 18.2% year-over-year. The index has declined steadily for 28 consecutive months.

Eleven of the 20 metro areas surveyed in the report showed record rates of annual decline, while 14 reported declines in excess of 10% vs. a year earlier. The 20-city composite index set a new record for price declines, down 18.2% from a year earlier, compared with October's 18.1%. The metros with the biggest year-to-year price declines were Phoenix (-32.9%), Las Vegas (-31.6%), and San Francisco (-30.8%). All 20 metro areas posted their third consecutive monthly decline.

Dallas and Denver Show Smallest Declines

The report came a day after an unexpected jump in the sales of existing homes in December, fueled largely by bargain prices for foreclosed homes in hard-hit areas of the U.S.

"The freefall in residential real estate continued through November 2008," David M. Blitzer, chairman of the index committee at S&P, said in a news release. "Since August 2006, the 10-City and 20-City composites have declined every month." (Standard & Poor's is a unit of The McGraw-Hill Companies (MHP), as is BusinessWeek.)

The metros that did best in the most recent report were Dallas and Denver, which showed modest year-over-year declines of 3.3% and 4.3%, respectively.

Goldman Sachs (GS) researchers said that after seasonal adjustment, "it appears the pace of price decline in November was similar to the pace in October: Prices were declining at around a 21% annual rate, a very rapid clip.…The incremental worsening is coincident with the overall downturn in the economy."

Mintz is news editor for BusinessWeek.com in New York.

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