Schussing the black diamond: home prices go straight down

Posted by: Peter Coy on December 26, 2007

skier.jpg
To a skier, schussing a black diamond means going straight down a very steep trail. Which pretty much describes what’s happening to the housing market—and not just in ski country. Today, Standard & Poor’s announced the biggest annual decline yet recorded in the S&P/Case-Shiller 10-City Composite Home Price Index. Prices in 10 big metro areas fell 6.7% from October 2006 through October 2007. That exceeds the 6.3% annual decline through April 1991, which was during a recession. (The 10-city series began in 1987.)

S&P quotes Yale economist Robert J. Shiller as saying, “No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim.” Shiller is an inventor of the index and chief economist of S&P’s index partner, MacroMarkets.

A few bullet points of awfulness:

*The 20-City Composite fell 6.1%, which was a record for the series (which goes back to 2000).
*Miami had an annual decline of 12.4%, followed by Tampa at 11.2%, Detroit at 11.2% and San Diego at 11.1%.
*Atlanta and Dallas entered negative territory in October, leaving only Charlotte, Portland, and Seattle with annual increases in home prices through October.

So not only is housing heading downhill, it’s doing so at high velocity. Alert the Red Cross.

Reader Comments

Tim Foster

December 27, 2007 12:55 AM

I pull statistics of the properties that have actually sold in the last six months. From there, you're able to determine a fair market price. If there are a lot of sales near asking price, they liekly won't negotiate much (because someone will come along and pay at/near their price).
http://www.johnbeck.tv

Kevin Comerford

December 28, 2007 9:18 AM

Here's what Peter and the rest of the national media relegate to footnotes: Any hill does not a black diamond make.

Anyone who has skied in more than one area of the country can tell you that the difference from one area's "black diamond" to the next is night and day. This phenomenon could not parallel the current situation in the real estate market any better, however the idea that a ski hill is a ski hill is contributing somewhat to the spread of the slowdown.

Now I'm not the most prolific skier, however I do enjoy it quite a bit. That said, the first black diamond I've skied is at Kissing Bridge (Glenwood, NY) and it is quite different from the black diamonds that I've skied at Stowe, VT and Breckenridge, CO or Seven Springs, PA. Ironically if you look at the real estate markets in these areas they are quite different as well. The differences are startling, most noticeably in the run-up of prices over the past several years. Yes, most major markets across the US will see price declines over the next year or two but most will be the size of a bunny hill when you look at the long-term. Anyone who has followed the whole story will agree that the black diamonds will be steepest in the Southwest, Florida and the rust-belt. Ironically these are the areas that Peter relegates to pseudo-footnotes.

Irene Quirus

December 30, 2007 5:37 AM

I have witnessed first hand at least 3 major housing slumps. I would like to comment on this current one. In Southwest Florida, where we have property, the prices jumped in the spring of 2005. It was totally unrealistic that the condos and houses should have gone up that high. Also, the prices went up based on the proliferation of flippers who took advantage of easy credit and who wanted to make a quick return. Retirees worried that the prices would escalate further were willing to pay more than a property was worth. I was shocked at what happened with prices. Now, it seems to me that a property priced back at the 2003 to 2004 level has a chance to sell, but many sellers are reluctant to cut their price. There are probably good buys out there, so I would suggest anyone interested in a property in southwest Florida make an offer that makes sense to them, not what the sales price indicates.

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November 9, 2009 8:38 AM

Anyone who has skied in more than one area of the country can tell you that the difference from one area's "black diamond" to the next is night and day.
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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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