May 28, 2008
Another Grim Case-Shiller Index
The latest Standard & Poor’s/Case-Shiller index, which tracks home prices in 20 U.S metro areas, is particularly dire.
The decline in the S&P/Case-Shiller U.S. National Home Price Index – which covers all nine U.S. census divisions – reached well into double digits, recording a 14.1% decline in the 1st quarter of 2008 versus the 1st quarter of 2007, the largest in the series’ 20-year history. As a comparison, during the 1990-91 housing recession the annual rate bottomed at -2.8%.
In L.A. and Orange counties, the decline was 21.7 percent from a year ago. And we probably aren’t done yet. This article from The Motley Fool that encapsulates why housing won’t be recovering anytime soon:
1) Foreclosures: They’re way up, and they’re not nearly done. Normal home-sellers will have to compete with them. ”Most observers believe that, with the pace of mortgage rate resets still picking up, we may not have seen anything yet regarding the number of foreclosure actions.”
2) Credit: People talk about credit tightening up, but in fact it has simply returned to normal. How many people do you think can put down 20 percent? That’s what’s required. “The days of lenders casually tossing mortgages to buyers who shouldn’t have qualified to finance a pencil are long gone.”
3) Fear: With gas and food prices rising and the economy tanking, people are afraid to commit to large purchases. “Folks who lack confidence in the economy or in their own financial situations don’t often buy homes.”
4) Inventory: There is about a one-year supply of homes on the market in many places, compared to 3.6 months during the height of the market. And that doesn’t count all the people who would like to sell but are waiting for a better time. “The underlying contingent of houses not technically on the market may dwarf the inventory we know about.”
And if you think things are bad in Cali, they’re worse in Florida. I loved this quote from the Palm Beach Post’s real estate blog:
Meanwhile, the comedians over at the National Association of Realtors put an instant-classic headline on today’s release: “Existing-home sales ease due to mortgage restrictions.” Funny how we never saw a boomtime headline reading: “Existing-home sales soar due to brain-dead lending standards, rampant lying on loan applications.”
Recent Redfin posts:
Sales Still Flat in Beverly Hills Flats
Is it a Good Time to Buy, and Figuring Out the Rent Ratio
