U.S Home Prices Decline

March 26, 2008

The drop in U.S. home prices accelerated in early 2008 and shows no sign of bottoming.

Preowned home prices nationwide fell by a record 11.4 percent in January, according to the monthly S&P/Case-Shiller home price index released Tuesday.

And while Dallas home prices continued to hold up better than those in its peer cities, the closely watched report showed that values here fell by 3.3 percent from a year earlier – the biggest drop yet. Prices locally were down 1.8 percent from December.

"Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007," S&P’s David M. Blitzer said in a statement. "Home prices continue to fall, decelerate and reach record lows across the nation."

The largest January declines were in Las Vegas and Miami, where prices fell by more than 19 percent from a year earlier. The only market where prices were still rising was Charlotte, N.C., which had a 1.8 percent increase.

Half of the 20 cities Case-Shiller surveyed had double-digit price drops in January compared with a year earlier.

Case-Shiller compiles its price index using sales data for typical single-family homes located in each of the metropolitan areas. The survey does not include condominiums and townhouses. It also only covers preowned properties – no new construction. The Case-Shiller researchers say they compare specific single-family homes that have sold more than once in order to measure true appreciation of a home. They exclude homes that are not typical for an area.

Since the number of North Texas homes on the market has stayed relatively flat in recent months, some analysts are puzzled by the degree of local price declines. In February, just over 43,000 preowned homes were for sale in North Texas. That’s down 1 percent from a year ago.

"Price appreciation is driven largely by the inventory levels," said Mark Dotzour, an economist with Texas A&M University’s Real Estate Center. "I’m a little surprised we are seeing price declines in Dallas. I wouldn’t panic about it."

The latest Case-Shiller report follows figures released Monday by the National Association of Realtors that showed median existing sales prices in February fell 8.2 percent to $195,900. That’s the largest nationwide annual drop in the Realtors statistics going back to 1999. Local statistics show that North Texas preowned home sales prices peaked at $158,000 in June 2007. In February, the median price was $138,550, according to the North Texas Real Estate Information System.

That works out to just over an 11 percent decline from the high point last summer. But prices typically fall during winter months.

Yet another national report out on Tuesday said that U.S. home prices fell by 3 percent during the 12 months ending January. That estimate by the Office of Federal Housing Enterprise Oversight also includes data from mortgage refinancings and new home sales. The OFHEO statistics also do not include higher-priced houses.

Economists are already worried that the usually busy spring season could be in jeopardy.

"I wouldn’t be looking for a pattern of improvement until April, May or June," said Brian Bethune, chief U.S. economist at Global Insight.

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