Prices of U.S. single-family homes plunged a record 14.1 percent in the first quarter from a year earlier, marking a pace five times faster than the last housing recession, according to the Standard & Poor’s/Case Shiller national home price index reported on Tuesday.
The S&P/Case Shiller composite index of 20 metropolitan areas fell 2.2 percent in March from February and plummeted 14.4 percent from March 2007.
This is the largest drop on record:
Prices continue to slide as record foreclosures put more homes on the market and stricter lending standards make it harder to get loans. Falling home values are slowing consumer spending, threatening to halt the six-year expansion.
“Many households are putting their home-buying plans on hold, given the expectations that the house price corrections will persist,” Celia Chen, an economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “The housing downturn remains in full swing.”
Remember, these are March numbers- the spring selling season. Price drops tend to be more pronounced in the fall and winter. What is the market liable to look like six months from now?
Time for the NAR to call another bottom!
Good ol’ Las Vegas leading the way at a world class drop of 26%. The fallout from this is huge. Way beyond real estate. Realty Trac’s new state maps show counties. When you cursor each county it shows rate of foreclosure. Great tool. There was a county in Ok or Ark that had a foreclosure rate of 1 in 18. My business is retail and it might as well be 1929. Nasty.
I believe this is actually very good news. The faster we get the correction over the faster we move through this mess.
Every housing bear has continually talked about pricing being completely out of whack with the fundamentals. This is what we have been waiting for. Granted there is probably more downside, but at least sellers are starting to see the writing on the wall.
You can try to rush a glacier, but you are likely to have limited success.
Igor says dumbidea
Frankly I couldn’t be happier. With any luck we will continue to see price drops accelerate and by the time the Frank-Dodd plan gets voted on again it will be a moot point as prices will already be far far below the proposed 15% principal cramdown which will, hopefully, show how dumb an idea this is.
Oh, and btw, some guy on CNBC said that prices are already back at the 2002-2003 levels and some markets are back in the late ’90s!
entropy,
I’d hate to hear your idea of bad news. If this just affected investors or a reasonable amount of dwellers I suppose it could possibly be good news. You sound like you want to buy.
freemonster….no interest in buying at all. I just see this as the correction building momentum. This is a necessary step in order for us to get past this disaster. Yin/Yang thought process.
I agree with entropy. The sooner housing prices are reconnected to fundamentals, the better policy will be able to respond and the sooner financial markets will be able to stabilize and we can move forward.
Yes, I’m biased because I’ve had to wait for two years so far to buy a home in DC at resonable prices. There are still folks here who think they’ve doubled or tripled their money speculating on a home purchase. I don’t sympathize with them being upset about getting a normal rate of return.
Affordable, resonable housing is good for the middle class in the long-run, despite the trauma it causes this year and next.
Some markets are back in the late 90’s, go to Michigan for example where investors are buying up blocks of junk housing cheap. This Schiller news today has been the top story of the day!
Here is where I’d like to live, can’t afford it though.
http://www.autrainisland.com/
My fave is that new home sales went up. Or, in other words, more people bought declining assets. Great!
Keep in mind that this index is only through March! Financing for the February-March sales was an actually reasonable 5% rate with near 100% financing still available. Rates are now over 6% and lending standards have tightened up considerably. Add to this the tsunami of foreclosures coming this summer (after the June 30 fiscal period), and I expect more significant declines.
If the stock market crashed something like 50-60% it would be bad. Nothing like home prices crashing 50-60%, though. That would take the consumer as far out of the economy as there’s been in our lifetime. Whether you’re a renter, owner, buyer or seller that would make for a real strange situation. When the stock market goes down all the politicians become real concerned. Hopefully they’ll show a little concern here. Our economy is the consumer. We can’t all work for Wal-Mart.
Utterly fed up with the low (i.e., sellout) quality of reporting on housing, I responded to this completely idiotic story at Bloomberg:
California Housing Discounts Boost Sales, Reverse Losing Streak
By Kathleen M. Howley
May 27 (Bloomberg) — Housing demand in California, where one out of every eight U.S. residents lives, is reviving as bargain hunters buy foreclosed properties, reversing a two-year decline in home sales.
Sales in the state increased 2.5 percent in April, following 30 consecutive declines, the California Association of Realtors said in a May 23 report. The median home price tumbled 32 percent in April from a year earlier to $403,870, the biggest drop in at least three decades, dragged down by sales of foreclosed properties, the Los Angeles-based trade group said.
About 30,000 foreclosed homes have been auctioned in California so far this year, the most of any U.S. state, according to RealtyTrac Inc. in Irvine, California. Banks holding repossessed properties are so eager to unload them they’ll give buyers discounts of as much as 40 percent, said Celia Chen, an economist at Moody’s Economy.com in West Chester, Pennsylvania.
“Lower prices will certainly entice buyers back into the market, especially in a state like California where the median home price is so high it’s made it very difficult for people to afford a home,” Chen said.
This was my response:
Hi,
Wait a minute–let’s not get back into b.s. reporting on housing. Over the weekend I actually talked to a person at Wachovia, no less, who is involved in selling repossessed housing, no less.
Know who’s buying? Speculators. Foreign, to be exact. With cash, to be exact. Taken from the trunk of the car. To be exact. NO ONE ELSE.
Don’t be UTTERLY ridiculous. There is NO demographically sustainable recovery in California housing. You are COMPLETELY deluding your readers by suggesting that this is anything but foolish speculators who are bound to lose on their stupid gamble–because housing prices are going to continue to decline in this state. Basically, forever.
Are you a shill for the NAR? You sound like that scum Lawrence Yun. Grow up.
Correct your ill-informed story.
Freemonster,
I beg to differ. We CAN all work for wal-mart. They can just buy up everything (from your mom and pop hardware store to auto dealerships). They could even own and sell the real estate. And since we’d all work for them….they could be the bank too!!! We’d be on kind of a credit system. They’d give us credits based on how much work we perform and we could use that credit to buy stuff from them. It’d be beautiful.
Hang on…..if you replace “wal-mart” with the “government” then I guess this has already been done in other countries. It’s called socialism or something. And for a second I thought I had an original idea
Here’s another stat that didn’t get much press today. The New Homes Sales number, while indeed up 3.3% (6K more than consensus) was actually more than offset by a 17K downward revision to March’s already horrific number.
So we wind up with 6,000 + -17,000 = -11,000.
Sure sounds like a bottom to me. Think when this “gain” gets revised down next month we’ll hear about it? Me neither.
This is GREAT! Honestly! No, I’m not looking to buy, and yes, I DO know of the terrible economic consequences this will bring.
But hey, doncha believe in ‘free markets?’ In this theory, we need SOME firms to go OUT of business… that way, financial capital can be redeployed into other, more meaningful pursuits.
Google Schumpter’s ‘Creative Destruction’ theory…. we need to rebuild our rail, ports, locks and dams, and our power plants. We need that capital that has been ‘uselessly’ tied up in speculative home building. Money ain’t leaving one business for another, voluntarily… SOMEbody needs to go out of business.
Homebuilders? Speculators? Realtors?
Spud, Entropy, John et. al.
Just got back online today, and can’t make too much sense over the din of battle. However, there could be a bit of panic mixed in with the constitutional issues involved with NY requiring the GSEs to get independent appraisals, and OTS / OCC and friends urging a rollback on this.
Oh well, at least oil plunged under $130 a barrel
Yossarian,
Thanks for the heads up on Schumpter’s work. Kinda like starting a fire to slow down a fire. I would think the type of firms that need to go out of business are the ones stuck in the past and not really contributing anymore. What’s happening here is the one being put out of biz is not a company or firm but the one segment of our economy that makes the economy tick. Consumers. Homebuilders, realtors and speculators, who cares. Consumers allow our economy to work. Take them out and it’s oohfta, ya know. Financial capital for infrastructure will come from only one source. The consumer
John-
It’s sad when oil around $128 looks like a good thing!
Freemonster:
That’s exactly my point. Houses are non-productive assets. Basing an economy on FIRE (Finance Insurance Real Estate) is an example of an ‘Extraordinary Delusion’. We need the entire sector (most of it) to dissapear.
The money’s not coming from the local consumer. We’ve ‘developed’ our FIRE economy until it’s 70 percent consumer stuff… this is unsustainable.
Whatever form investment capital takes (SWFs, etc.), it needs to make a profit. The sooner the FIRE economy is destroyed (Schumpeter), the more quickly we can get to the business of alternative fuels, rebuilding infrastructure, etc. When there’s a profit to be made, the money will appear.
And Twist?
I think it’s sad that oil isn’t $200 dollar a barrel! We’ve built our economy on the premise of cheap oil. The sooner it’s $200 bucks a barrel, the more complete our ‘Creative Destruction’ will be.
Yes, I know… lots of economic pain coming… but had you read theoildrum.com the past few years, or had read the US DOE’s own report on ‘peak oil’ (The Hirsch Report), the more you’d realize…. we NEED $200 a barrel oil… Americans just won’t conserve enough, otherwise.
Be good.