Housing Woes Deepen in U.S.
Posted: Dec 29 2010 Topic: Industry News Briefs
The core problem gnawing at the U.S. economy in 2007, 2008, 2009 and 2010 is looking like the core problem for 2011.
U.S. home prices took a steeper-than-forecasted tumble in October, according to data released Tuesday, a sign that the woes in the housing market are far from over despite indications things are improving elsewhere in the U.S. economy.
“There is no good news in October’s report,” said David Blitzer, chairman of the index committee at Standard & Poor’s, which released the data. “Home prices across the country continue to fall.”
The closely watched report on property values — the S&P/ Case-Shiller Index — slid 0.8% from the same month last year. As of October, average home prices across the United States are back to the prices they fetched in mid-2003, S&P said. The report showed six major U.S. cities experienced “double dips,” setting new lows from their 2006 peaks.
Home prices looked to be stabilizing over the spring and summer. But once a homebuyer tax credit from Uncle Sam expired a few months ago, prices started heading south again.
Falling prices are just part of the gloom.
Mr. Blitzer also noted that on a year-over-year basis, home sales are down more than 25% and the supply of unsold homes is about 50% above where it was last year, while housing starts are still hovering near 30-year lows.
The drop in prices has been a big jolt to U.S. consumers, many of whom, before the 2007 housing bubble burst, got used to relying on their ever-increasing home values as piggy banks.
The recent tax credits from the U.S. government delayed some of the fallout in the housing market.
Eleven cities — Atlanta, Boston, Chicago, Cleveland, Dallas, Denver, Minneapolis, New York, Portland, Ore., Seattle, and Washington, D.C. — are experiencing a “triple-dip” in prices, said Patrick Newport, U.S. economist with IHS Global Insight. “These roller-coaster rides are related to the two tax credits.”
Mr. Newport expects to see another 6% to 8% drop in home values, as weak demand, foreclosures and a glut of homes for sale take their toll.
But he is forecasting that prices will start turning around in 2011.
Prices may be declining in all 20 cities tracked by the index, but “they are not in a free fall, as they were in 2007 and 2008,” he said.
Joshua Shapiro, chief U.S. economist at MFR Inc. in New York, said it’s important to keep in mind that prices experienced a huge run-up before the bubble burst.
In the seven years leading to the peak in July 2006, the index of 20 major cities surged by 155%, or 126 index points, to a high of 206, he said. “So far, this index has dropped by 30% (61 index points) in the 52 months since the peak.”
Some cities have been a lot harder hit than others.
Average home prices in Detroit, for instance, are more than 30% below their values in January 2000, according to S&P. Las Vegas, Cleveland and Atlanta are close to their 2000 levels. Los Angeles, New York and Washington, D.C., have held up the best, with each market still more than 70% above its January 2000 level.
http://www.vancouversun.com/business/real-estate/Housing+woes+deepen/4036491/story.html