Home Prices Set Record

Widely Regarded Housing Study Reports Further Home Price Declines

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The Standard & Poor's/Case-Shiller home price index for October, released on Wednesday, fell again for what is the 10th consecutive month. The 6.7 percent drop from figures a year earlier was the largest recorded by the index since April, 1991 when prices declined 6.3 percent.

The S&P/Case-Shiller report uses methodology similar to that of the quarterly Housing Market Index report from the Office of Federal Housing Enterprise Oversight (OFHEO) - that is comparing repeated sales of the same property. In fact, Case-Shiller developed the system which was adopted by the federal agency. Case-Shiller, however, reports on a much smaller universe than OFHEO. The former looks at existing single-family homes in 20 metropolitan statistical areas (MSAs.) These areas are then aggregated to form two distinct indices - one a 10 city index, another for the entire 20 MSA sample. OFHEO's quarterly report separately evaluates all of the states and the District of Columbia and several hundred metropolitan areas. It also takes a less in-depth look at several dozen smaller markets.

Miami was the biggest loser in the broad index with a decline of 12.4 percent in October, 2007 compared to October, 2006. Tampa, Florida was off 11.8 percent year over year while Detroit, Las Vegas, Phoenix, and San Diego also posted double digit declines.

Charlotte, North Carolina; Portland, Oregon; and Seattle, Washington each pulled out a price increase for October, 2007 over October 2006 with Charlotte leading the pack with an increase of 4.3 percent. Charlotte has become the home base of many major financial institutions including two of the nation's largest banks; Bank of America and Wachovia and has seen an enormous increase in employment over the last few years.

Robert Shiller, one of the designers of the study and chief economist at MacroMarkets, LLC commented that, "No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim."

Data is due on the last two business days of the year regarding November sales of both existing houses and new houses coming, respectively, from the National Association of Realtors and the U.S. Census Bureau/Department of Housing and Urban Development and will be reported here on Thursday and Friday. Information on interest rates and mortgage activity during the pre-Christmas week has been embargoed by the Mortgage Bankers Association and will thus have to be reported tomorrow.

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Of course, the properties are local, as are most of the lenders. However, when the lender packages and resells the mortgage to CountryWide, BB&T, or other national operations, the RISK of real estate markets becomes NATIONAL risk, not local risk. That's precisely why national trends are indeed relevant on a local level.

Above Posted By: SteveInBrownstown | Sat, 5 Jan 2008 10:22:28 EST

I agree, housing markets are local. These markets are a reflection of local economies. I posted an article on my blog on 10/22/07 and another on 11/25/07 that illuded to this fact. In the Metro area of Arizona the primary industry is growth. That growth has now been stalled by an over-built situation in the housing industry. At the same time the copper mining towns in Arizona have a very good market due to the world demand for their product.

Above Posted By: Bufford Warren | Fri, 4 Jan 2008 19:00:46 EST

It's my understanding the national overall price decline for 2007 was around 1.5%. Forecasting the national real estate market makes about as much sense as forecasting the national weather. Real estate is bought and sold on a "hyper-local" level. It's time real estate blogging professionals begun hitting the bloggosphere with a balanced local message - good or bad. If real estate profesionals are waiting for a "fair and balanced" approach to reporting real estate, it's never going to happen.

Above Posted By: Bobby Carroll | Sun, 30 Dec 2007 20:36:24 EST

Real Estate markets and figures are regional. Not all areas have declining values. The property is Dallas Fort Worth area and other parts of Texas do not have a problem like the ones mentioned. So when those people on TV say OH NO the WHOLE real estate market is dead they are confused. I dont know many news people that are actively in the real estate market either. So figures are just that, numbers that can be manipulated any way they wont it to sound.

Above Posted By: Tim | Wed, 26 Dec 2007 19:36:49 EST

When are the media machine folks going to quit selling real estate and housing news as a national market entitiy? Housing and real estate are a local economy and all of this negative news bombardment only strikes fear in the public. Yes, some parts of the country have had large increases in prices and now their pendulum has swung back. As a realtor, my job is so much education now due to all the 'doom and gloom' media it is really tiring!

Above Posted By: William | Wed, 26 Dec 2007 17:31:24 EST

Widely Regarded Housing Study Reports Further Home Price Declines

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