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Home prices fell most on record { January 2008 } Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aw61M2mwbf48&refer=homehttp://www.bloomberg.com/apps/news?pid=20601087&sid=aw61M2mwbf48&refer=home
S&P/Case-Shiller Home Prices Fell 9.1% in December (Update1)
By Shobhana Chandra
Feb. 26 (Bloomberg) -- Home prices in 20 U.S. metropolitan areas fell in December by the most on record, reflecting the deepening housing recession, a private survey showed today.
The S&P/Case-Shiller home-price index dropped 9.1 percent from December 2006, after a 7.7 percent decrease in November. Nationwide, home prices fell 8.9 percent in the fourth quarter from a year earlier, the biggest decline in 20 years of record keeping.
Prices may fall further as would-be buyers hold out for bargains and foreclosures add to the glut of unsold properties, extending the worst housing slump in a quarter century. Shrinking home values and credit restrictions threaten to reduce consumer spending and push the economy into a recession.
``It's inevitable that prices will decline a lot more in 2008 because inventory is so high,'' said Patrick Newport, an economist at Global Insight Inc. in Lexington, Massachusetts. ``It'll put a pinch on consumer spending.''
December's drop was the 12th monthly decline in a row and the biggest since the group began keeping year-over-year records on the 20-cities index in 2001.
Producer Prices
December home prices fell 2.1 percent from a month earlier, following a similar decline in November, the report showed. The figures aren't adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of month to month.
A government report today showed prices paid to U.S. producers rose more than twice as much as forecast in January, pushed up by higher fuel, food and drug costs, signaling inflation may keep accelerating even as growth slows.
The 1 percent increase in producer prices followed a 0.3 percent drop in December, the Labor Department said today in Washington. Excluding food and energy, so-called core wholesale prices climbed 0.4 percent, the most in almost a year.
The home price index was forecast to decline 9.7 percent, according to the median forecast of 10 economists surveyed by Bloomberg News. Estimates ranged from declines of 8.5 percent to 10.4 percent.
All but three of the 20 cities in the index showed year- over-year declines in prices in December, led by a 17.5 percent decrease in Miami and drops of 15.3 percent in Las Vegas and Phoenix. Prices rose in Seattle, Charlotte and Portland, Oregon.
Other reports confirm property values are tumbling. The median sale price of a U.S. home fell in the fourth quarter in 77 of 150 metropolitan areas, the National Association of Realtors said Feb. 14. That was the most since the group began tracking home values in 1979.
Existing-Home Sales
Sales of existing homes fell in January to the lowest level in at least nine years, pushing down the median sales price for the sixth time in seven months, the Realtors group said yesterday.
Home prices will ``continue to fall'' and the housing slump is having a ``broader effect'' on consumer spending, former Federal Reserve Chairman Alan Greenspan said yesterday at a conference in Abu Dhabi, United Arab Emirates. A recession is possible this year, and may be deeper than the last two, he said.
Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.
The S&P/Case-Shiller index and another by the Office of Federal Housing Enterprise Oversight track the same home over time and more accurately reflect price trends, economists said.
The gauges from the Commerce Department and the Realtors group can be influenced by changes in the types of homes sold. Higher sales of cheaper homes relative to more expensive properties will skew the figures lower.
While lower prices have helped attract some buyers into the market, builders continue to struggle. Kimball Hill Inc., a closely held homebuilder active in six U.S. states, said on Feb. 15 it may file for Chapter 11 bankruptcy protection.
``All markets that had hyper-appreciation are difficult,'' Ed Madell, Kimball Hill's chief financial officer, said in an interview. ``Those are the ones that have affordability challenges.''
Last Updated: February 26, 2008 09:39 EST
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