Source : Business Times - 28 Oct 2008
Prices of US single-family homes plunged a record 16.6 per cent in August from a year earlier and plummeted more than 30 per cent in Las Vegas and Phoenix, Standard & Poor’s said on Tuesday.
Home prices in 20 major metropolitan areas fell 1.0 per cent in August from July, according to the Standard & Poor’s/Case-Shiller Home Price Indices.
The composite index of 10 metropolitan areas declined 1.1 per cent in August from July for a 17.7 per cent year-over-year drop, also a record, S&P said in a statement.
‘The downturn in residential real estate prices continued, with very few bright spots in the data,’ David Blitzer, chairman of the Index Committee at Standard & Poor’s, said in the statement.
A huge supply of unsold homes, tighter lending standards and record foreclosures have pushed down home prices, deflating a bubble from the early part of this decade.
For the fifth straight month, prices fell in every region on an annual basis, he said.
Both the 10-city and 20-city indices have fallen from a year earlier for 20 consecutive months. In 13 cities, annual returns worsened from last month’s report, he said.
‘As seen throughout 2008, the Sun Belt markets are being hit the most,’ he said.
Prices in Miami, San Francisco, Los Angeles and San Diego all dropped in excess of 25 per cent, he said.
The sharp declines in these regions of the country are in stark contrast to other areas, according to Michelle Meyer, an economist at Barclays Capital in New York.
‘It is interesting to see the split in home prices on a regional basis and it is clear certain areas are bringing down the national average,’ she said.
The previously ‘bubble’ areas, which had a large presence of risky lending and speculation, are struggling with a rising share of foreclosures, which have boosted sales but have depressed home prices, she said.
‘Home prices continue to fall sharply in these areas, but prices have started to stabilise or even increase in other areas,’ she said.
For the August/July period, prices rose in only 2 regions, Cleveland and Boston, S&P said.
S&P noted one bright spot as the acceleration in decline was only moderate in August from July.
That is perhaps a glimmer of hope for the hard-hit US housing market as it may indicate that the precipitous drop in home prices could be abating.
Indeed, the 1.1 per cent month-over-month price drop in the 10-city index is in line with the trend in recent months, but less than half the pace recorded in the first quarter, when prices plunged in response to the drop in sales after the start of the credit crunch, according to Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla, New York.
Assuming prices continue to fall at this pace, the year-over-year rate will bottom out close to its current rate in October and will then rise over the next few months, though it will remain double-digit negative for the foreseeable future, he said in commentary published on Tuesday.
Standard & Poor’s/Case-Shiller Home Price Indices have shown more severe declines in prices than other reports.
US home prices fell 0.6 per cent in August versus July, the Federal Housing Finance Agency said last week.
For the 12 months ending in August, US home prices fell 5.9 per cent, and the cumulative decline since the April 2007 peak is 6.5 per cent, according to the FHFA’s House Price Index.
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