Should We Cheer An 18-Percent Drop in Home Prices?
According to Business Week there’s good news on the home front.
“Case-Shiller Home Prices Decline Only 18%” reads the headline. And then we discover that “the latest Standard & Poor’s/Case-Shiller housing index numbers out today show the market falling less dramatically than it had been earlier in the year. The 10 and 20 city indices were both down 18% in April, versus the same month in 2008. But that decline was less severe than it had been in January, February and March.”
Really? A consistent decline of only 18 percent is good news? You’re kidding.
“The pace of decline in residential real estate slowed in April,– says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In addition to the 10-City and 20-City Composites, 13 of the 20 metro areas also saw improvement in their annual return compared to that of March. Furthermore, every metro area, except for Charlotte, recorded an improvement in monthly returns over March. While one month’s data cannot determine if a turnaround has begun; it seems that some stabilization may be appearing in some of the regions. We are entering the seasonally strong period in the housing market, so it will take some time to determine if a recovery is really here.”
Looming Home Price Concerns
Before we start talking about the light at the end of the tunnel and green shoots emerging from foul fields, let’s look at some realities:
First, unemployment levels are awful and getting worse. They are a precursor of foreclosures to come.
Second, many states have foreclosure moratoriums (moratoria?) in place, programs which knock down foreclosure statistics and help maintain home prices.
Third, a huge number of foreclosed homes that are now owned by lenders are not on the market. Instead, lenders are waiting for prices to firm. However, if so many homes were instantly made available for sale they would push down prices.
The Case-Shiller index shows what it shows, but it certainly does not explain the dynamics which impact the marketplace.
For the full story, see: Case-Shiller Home Prices Decline Only 18%.
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