Home Prices Continue to Slide

The latest S&P/Case-Shiller Home Price Index, which tracks housing prices in 20 major U.S. metro areas, fell 18.2 percent year-over-year in November, the largest drop since the creation of the index 21 years ago. Certain markets took the largest hits. In fact, it was a case of rounding up the usual suspects: Phoenix, Las Vegas and San Francisco have seen declines since this time last year of more than 30 percent. Miami and Los Angeles saw drops in the high 20s. All this is bad news for those who bought houses two or three years ago, especially upper-end dwellings acquired with leverage out the wazoo. But it might be good news for people previously priced out these formerly expensive markets, provided they still have incomes and good credit. Some metro areas avoided double-digit year-over-year declines. For example, Dallas was down 3.3 percent, and Denver was down 4.3 percent. Metro New York’s housing prices have thus far avoided a huge meltdown as well, ending November down “only” 8.6 percent compared with the same time last year, and metro Chicago is down “only” 12.5 percent over the same period. What was the reaction by Wall Street to the various declining indicators published on Tuesday? Essentially, a yawn. The Dow Jones Industrial Average was up 58.7 points, or 0.72 percent, while the S&P 500 and the Nasdaq were up 1.09 percent and 1.04 percent, respectively. Perhaps investors are taking a breather after the agitations of last week. In what might evolve into a bit of good news, the Federal Reserve floated a plan on Tuesday, which it presented to members of Congress, to prevent home foreclosures. The plan would let regulators rewrite Fed-owned mortgages so that borrowers can get better terms–if they demonstrate that they won’t re-default on the revised mortgage. That’s a fairly big if. Still, whatever the Fed does at this point isn’t likely to add any spring to the step of consumers. The Conference Board’s Consumer Confidence Index was down in January to 37.7–the lowest ever for the index, which dates back to 1967. The index represents a survey of 5,000 households nationwide, and once upon a time (January 2007) stood at 87.3. The index “continues to hover at all-time lows and… consumers have begun in the new year with the same degree of pessimism that they exhibited in the final months of 2008,” noted Conference Board director Lynn Franco. Likewise, the commercial real estate industry is feeling fairly glum these days. In the first-ever Real Estate Roundtable Sentiment Survey, which will be published quarterly, more than 130 survey respondents in the industry agreed that conditions in commercial real estate are extremely poor now and might get worse in the coming months. Any improvement later in the year or in 2010 would depend, most of the respondents agreed, on timely federal action to reinvigorate the economy and unfreeze frozen credit markets. “While some of our members are more “optimistic” that the right combination of policy actions can begin to unlock markets and get money flowing again, right now even sound businesses are in survival mode,” said Roundtable president & CEO Jeffrey DeBoer. “For many, just staying alive in 2009 will be a great accomplishment.”