Home prices fall

Mortgage and Lending with Advantage One Home Loans


U.S. home prices fall for first time since 1991 By Rex Nutting, MarketWatch Last Update: 12:51 PM ET May 29, 2007
WASHINGTON (MarketWatch) -- U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday. A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarters. The Case-Shiller indexes cover three geographical areas. The national index is released quarterly, while the 10-city and 20-city indexes are released each month. The 10-city Case-Shiller price index fell 1.9% year-on-year through March, while the 20-city index dropped 1.4%. The 10-city index has fallen nine months in a row, while the 20-city index has fallen for eight straight months. All three Case-Shiller indexes show continued deterioration in home prices. Prices were falling or rising slower in most U.S. cities. The national decline "is reaffirmation of the pullback in the U.S. residential real estate market," said Robert Shiller, chief economist for MacroMarkets LLC, and co-inventor of the index. "This fall is consistent with the ongoing trend that has developed over the past year," wrote Goldman Sachs economists, who said they believe the Case-Shiller index is the best gauge of home values. "We remain comfortable with our forecast of house prices falling by 5% over 2007." Falling home prices have squeezed many borrowers who have been able to extract equity from their homes or refinance their loan to avoid a sudden increase in mortgage payments as their adjustable-rate loan reset. As a result of falling prices, foreclosures are rising nationally, especially in regions with a weak economy, such as the Midwest, and in the bubble regions of Southern California, Florida, Nevada and Arizona. Thirteen of 20 cities in the Case-Shiller index have seen falling prices in the past year, led by Detroit (down 8.4%) and San Diego (down 6%). Home prices rose 10% in Seattle, 7.4% in Charlotte, N.C., and 7% in Portland, Ore. Prices in Phoenix and Las Vegas, Nev., have fallen the furthest from their peak. After growing at a 49.3% pace in September 2005, home prices in Phoenix are now down 3% year-on-year. In Las Vegas, price gains went from 53.2% in September 2004 to negative 1.6% in March 2007. Among other major cities tracked by the index, home prices are down 4.9% in Boston, down 4.8% in Washington, down 3% in Tampa, Fla., down 2.4% in Cleveland, and down 2.3% in San Francisco. Prices fell 2% in Denver, 1.9% in Minneapolis, 1.4% in Los Angeles and 1.1% in New York. In addition to the price gains in Seattle, Charlotte and Portland, prices rose 2% in Atlanta, 1.6% in Dallas, 1.3% in Chicago and 1% in Miami. The Case-Shiller index is considered a superior gauge of home prices compared to the median sales-price data released by the Commerce Department or National Association of Realtors, because it tracks multiple sales on the same property and is therefore not influenced by a different mix of homes sold in a period. Unlike the price index produced by the Office of Federal Housing Enterprise Oversight, the Case-Shiller index does not include refinancings. And, also unlike the OFHEO index, it includes homes with mortgages larger than the conforming limit of $417,000. The OFHEO index for the first quarter will be released on Thursday. Through the fourth quarter, home price gains had slowed to 5.9% year-on-year from 13.3% a year earlier. The OFHEO purchase-only index (which excludes refinancings) had risen 4.1% year-over-year. Lehman Bros. economists said their forecast for a 0.5% gain in the first-quarter OFHEO price index remains on track. That would put the year-over-year gain at 4%. End of Story Rex Nutting is Washington bureau chief of MarketWatch.

Comments (7)

Jonathan Schreurs
Advantage One Home Loans - Sonora, CA
This news, however devasting it sounds, is not really news. Property values, since 1991, have practically doubled. Losing roughly 2% is not a big deal in the grand scheme of things. Real Estate is a Market. Unlike the stock market which produces major gains one week, and then lose half of that gain the next. Real estate is a safer, more tangible asset. It can be leveraged against to purchase more real estate and in some areas it will still appreciate even as the broader market falls. Long term investment in property is where the money is made. Thirty years from now, when the home is free and clear. The monthly rents an income property will produce will far exceed any dividend the stock market can produce with the same investment. The way to look at real estate has not changed. Investors will still look to find good buys, limiting their risk even if the market were to fall more. Homeowners will still be looking for that dreamhouse, retirement home, or first home and the market value will not be of consequence to them.  
Jun 06, 2007 08:11 AM
Paul Moye
Benchmark Realty - Franklin, TN
Broker, GRI, SRES
The 20 cities that fell need to keep falling! Home prices in some of those markets is still PUFFED way above the true values
Jun 06, 2007 08:36 AM
Michael Thomas
First SEO Consultants - Scottsdale, AZ
Real Estate Website Optimization

Thanks for posting the facts - it is nice to see them

Jun 06, 2007 08:57 AM
Leo Namiot - LeoLends.com
Canopy Mortgage - Leo Namiot - Saint Augustine, FL
More than just great rates
I am starting to see good size drops in our area as well as appraisals coming in short!
Jun 06, 2007 09:14 AM
Thomas Phillips
ERA Advantage - Sonora, CA
I agree, many of my collegues and peers are concerned with the real estate market lately. Relax, this has all happened before. Yes it gets a little worse every time the market takes a down turn, but the market will always come back. We all just have to ride out the storm.
Jun 06, 2007 02:24 PM
Home prices will keep fallling below what new homeowners and real estate professionals want them to.  Why?  Because of the ridiculous, unfounded price increases that was fueled by the herd mentality.  People didn't want to think of the eventual, unavoidable consequences that their actions would, are, and will continue to bring.  My husband and I will not buy a house just because we want one oh soo badly regardless of the price.  We would rather put food on the table and save toward retirement-so that at the very least we have enough money in our old age to pay for the rented roof over our heads.
Oct 11, 2007 10:41 AM
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

We invite you back to ActiveRain in 2016!

    Much has changed since your last visit to ActiveRain.  I encourage you to take another look at the website. 

    Surf some blogs, leave some comments.  Better yet, post a Blog.

    Best to you!

Jun 21, 2016 08:42 PM