The battle of the home price databases continues. The Standard & Poor’s/Case-Shiller index out this morning shows a record 16.3% price drop in July from the year-ago period. That was the largest slide since the index was created in 2000. The index tracks resale, single family home prices in twenty large cities. An older index that follows the ten largest cities plunged 17.5%, the biggest decline in its 21-year history.
Las Vegas was hit the hardest with prices down nearly 30%, followed by Phoenix and Miami, which were down 29% and 28% respectively. To put these declines in perspective, during the last big housing bust from 1990 to 1992, the steepest year-over-year decline was 6.3%. Prices peaked in October 1989, according to the Case-Shiller numbers. They hit bottom in February of 1994 but it took until January of 1998 for prices to reach their previous high again, a cycle of nearly nine years.
There was some good news in the Case-Shiller data. While all twenty cities showed year-over-year declines, six managed to post monthly increases from June to July. Those cities were Atlanta, Boston, Dallas, Denver, Detroit and Minneapolis. Denver had the largest month-over-month increase at 1.3%. “There are signs of a slow down in the rate of decline, but no evidence of a bottom,” David Blitzer, head of S&P’s index unit said.
The National Association of Realtors, whose data is reported by its members and follows the entire country, not just the largest cities, reported a 7% median home price decline in July to $212,000. The association is already out with its August numbers, which show a steeper 9.5% fall to a $203,000 median price nationally.
One reason why prices have declined so sharply is many of the homes being sold are distressed situations—short sales and foreclosures. “They’re bank-owned properties with dead lawns and green swimming pools,” says Rob Jensen, a RE/MAX agent in Las Vegas. “They account for 75% of the sales right now. That pushes pricing down. It’s just a snowball effect.”
Jensen figures prices in Las Vegas are back to 2002 levels. But there is a silver lining. “So many people were priced out for so long,” he says. “The last four years you couldn’t find a home for under $300,000. Now, you can find a great home with a pool for $250,000.”
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.