Home prices drop record 15.8%

The S&P/Case-Shiller Home Price Index of 20 cities fell for the 22nd consecutive month.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Les Christie, CNNMoney.com staff writer

case_schiller_numbers.jpg
What do you think the government should do to cut the deficit?
  • Raise taxes for everyone
  • Raise taxes for the wealthy
  • Cut spending on the military
  • Cut spending on social programs
Mortgage Rates
30 yr fixed 3.99%
15 yr fixed 3.06%
5/1 ARM 3.20%
30 yr refi 3.99%
15 yr refi 3.07%

Find personalized rates:
 

Rates provided by Bankrate.com.

NEW YORK (CNNMoney.com) -- May home prices dropped a record 15.8% from a year ago, according to the S&P/Case-Shiller Home Price Index of 20 cities. It was the 22nd consecutive month of decline recorded by the index. Prices fell 0.9% from April to May.

Each of the 20 metro areas covered by the index posted annual declines; nine posted record lows and 10 cities recorded double-digit drops.

The Case-Shiller 10-city Index posted a year over year decline of 16.9%, and a 1% month over month dip. Both the 10-City Composite Index and the 20-City Composite Index are reporting record annual declines.

"Since August 2006, there has not been one month where we have seen overall price increases, as measured by the two Composites," said David Blitzer, Chairman of the Index Committee at Standard & Poor's.

Losing streak

Case-Shiller has been tracking the 20-city index for 19 years, while the 10-city index is 21 years old. The current streak of price declines has been unprecedented in both its length and depth. The last extended decline began in in April 1990, when the 10-city index sank for 10 consecutive months. But that total loss was just 6.5%.

Since the 10-city index peaked in July 2006, it has plunged 19.8%. The 20-city is down 18.4% from the peak.

The 20-city index's Sun Belt cities, which recorded the biggest price gains during the boom, have led the charge down. Las Vegas prices have plummeted 28.4% during the past 12 months; Miami prices fell 28.3%; and Phoenix homes lost 26.5% of their value.

Midwest metro areas, which have endured tough economic times for years, are also feeling the pain. Detroit prices are off 17.4% for the 12 months, and Cleveland is down 8%.

Northeast cities like Boston, down 6.2% for the 12 months, and New York, off 7.9%, have been less volatile than the Sun Belt.

The smallest year-over-year declines were recorded by Charlotte, N.C. (down 0.2%), Dallas (down 3.1%), and Denver (down 4.8%).

The soaring numbers of foreclosures are helping to push down prices. Banks tend to slash prices when selling repossessed homes, since they lose money every month a house sits vacant. They must pay property taxes, maintenance expenses and utility costs while getting nothing back in return.

Those sales, in turn, tend to bring down prices in the rest of a given neighborhood, creating a vicious cycle.

Foreclosures accounted for a large - and growing - share of all existing homes sold in some markets. In California, for example, 40% of the existing homes sold during the three months ended June 30 were foreclosures, according to DataQuick, a real estate information provider. That's up from just 5.4% during the same period in 2007.

Rays of light

Optimistic observers might point out that price declines appear to be slowing. The 10-city index's 1% month to month dip in May was less than April's, when it registered a 1.5% decline, while the 20-city index fell just 0.9% in May after dropping 1.3% in April.

But that 0.9% dip repeated over 12 months would result in an annualized rate of 13%, according to Dave Seiders, chief economist for the National Association of Home Builders. Still, it's an improvement over the rate of decline from Jan. to Feb, which was 26% on an annualized basis.

"There's still strong downward movement," he said, "but it's not as rapid as earlier in the year."

There are, however, some positive signs.

"The smaller price decline in May suggests, provides a first hint, that conditions may start improving," said Mike Moran, the chief economist for Daiwa Securities America.

"If you look at home sales data, they're starting to stabilize," he said. "Some potential buyers have decided to step back into the market. They see attractive opportunities. I don't think the correction is over but the tone is improving."

Lawrence Yun, the usually optimistic chief economist for the National Association of Realtors, pointed out that in places like Las Vegas and Phoenix, where drastically lower prices have led to an uptick in sales volume, conditions may be stabilizing.

But Patrick Newport, an economist with Global Insight, an economic forecasting firm, thinks there are more hard times ahead. He points out that seasonal variations may account for what appears to be a slowdown in the pace of the May decline.

"You can't go by monthly numbers," he said. "What I look at is the Census Bureau's inventory of vacant homes on the market. That hasn't budged much, although it dropped to 2.8% [of total homes for sale] in the second quarter from 2.9%."

Historically, vacant homes have made up about 1.7% of housing inventory.

"What's worrying me is that foreclosures are adding to inventory, and the inventory numbers tell you what to expect for the next couple of years," says Newport. "They're saying home prices will drop."

And Yun expresses concern over mortgage rates, which have been on the rise. Higher rates can cancel out more affordable prices by increasing monthly mortgage payments.

The new housing rescue bill that just cleared Congress over the weekend may help, however. "The tax credit for first-time home buyers will offset the slight rise in mortgage rates," he said.  To top of page

Find mortgage rates in your area


Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
Want to buy -- and live in -- a piece of history? It's not that far out of reach. These historic homes are not only for sale, they are incredible bargains. More
5 ways retailers are tracking you If you think pesky salespeople are invading your personal space, check out these 5 technologies that are tracking your movements throughout a store. More
Moto X vs. Droid Turbo: Which Droid should you buy? Motorola has made the two best Android smartphones this year. Here's how they stack up. More


Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.