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Written by Polina Vlasenko
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Thursday, 16 October 2008 03:00 |
Hope for the success of the government's bailouts of the financial markets and for the American economy are riding heavily on a turnaround in the housing market. But there are no signs of that happening, according to the latest data from the Standard & Poor's/ Case-Shiller Home Price Indices.
The indices track changes in the value of the residential real estate in 20 metropolitan areas across the United States. These indices are constructed from the actual sale prices of existing single family residences that have been resold, which leaves very little room for subjective judgment This makes these measures very accurate in reflecting the change in the market prices of existing homes.
S&P/Case-Shiller Home Price Indices report data for each individual metropolitan area as well as two composite indices. The indices have a base value of 100 in January 2000. The chart below shows the level of the two composite indices and their annual rate of change. Released late last month, they cover the evolution of home prices through July 2008.  The data shows that the broad decline in home prices continued. In the 12 months ending July 2008, the 10-City Composite Index fell 17.49 percent, while the 20-City Composite Index fell 16.35 percent. Both of these are record 12-months declines. The 10-City Index includes the following metropolitan areas: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, San Diego, San Francisco, and Washington, D.C. The 20-City Index adds Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle, and Tampa. Measured from the peak of the housing boom, which was in mid-2006, the 10-City Composite Index has fallen 21.14 percent, while the 20-City Composite Index has fallen 19.51 percent. Both indices are currently at the level they were in mid-2004. The table below summarizes information for each of the metropolitan areas included in the index. The areas in the table are ordered by magnitude of the cumulative decline in the house prices since the peak of the boom. | Region | 1-month change (%)
| 12-months change (%)
| Decrease from peak (%)
| Date of peak | Prices reached trough in | Increase since trough (%)
| | Phoenix - AZ | -2.68% | -29.27% | -34.44% | Jun-06 | | | | Las Vegas | -2.75% | -29.90% | -34.34% | Aug-06 | | | | Miami | -1.60% | -28.25% | -33.48% | Dec-06 | | | | San Diego | -1.81% | -25.02% | -31.21% | Nov-05 | | | | Los Angeles | -1.63% | -26.18% | -29.71% | Sep-06 | | | | San Francisco | -1.85% | -24.81% | -28.16% | May-06 | | | | Detroit - MI | 0.57% | -16.67% | -26.64% | Dec-05 | | | | Tampa - FL | -0.02% | -19.37% | -26.47% | Jul-06 | | | | Washington - DC | -1.07% | -15.80% | -22.14% | May-06 | | | | Minneapolis - MN | 1.31% | -13.06% | -16.18% | Sep-06 | Apr-08 | 2.86% | | Cleveland - OH | -0.29% | -7.85% | -11.45% | Jul-06 | Mar-08 | 2.75% | | Chicago | -0.35% | -9.95% | -11.27% | Sep-06 | | | | Boston | 0.17% | -5.35% | -10.89% | Sep-06 | Mar-08 | 2.55% | | New York | -0.76% | -7.41% | -10.61% | Jun-06 | | | | Atlanta - GA | 0.43% | -8.24% | -8.24% | Jul-07 | Apr-08 | 1.27% | | Seattle - WA | -0.99% | -8.21% | -8.21% | Jul-07 | | | | Portland - OR | -0.47% | -6.59% | -6.59% | Jul-07 | | | | Denver | 0.77% | -4.72% | -5.42% | Aug-07 | Mar-08 | 4.14% | | Dallas - TX | 0.61% | -2.48% | -2.62% | Jun-07 | Feb-08 | 4.60% | | Charlotte - NC | -0.19% | -1.77% | -1.97% | Aug-07 | Feb-08 | 1.51% | | 10-city Composite | -1.09% | -17.49% | -21.14% | Jun-06 | | | | 20-city Composite | -0.88% | -16.35% | -19.51% | Jul-06 | | | Nine metropolitan areas have seen house prices decline by more that 20 percent from their peak values. Phoenix, Las Vegas, Miami, and San Diego experienced declines of more than 30 percent from their peaks . One possibly encouraging development is that seven metropolitan areas (Minneapolis, Cleveland, Boston, Atlanta, Denver, Dallas, and Charlotte) have seen increases in house prices over period of three months or more. These increases have not lasted long enough and are not large enough to be a definitive indication of a turnaround in the housing market, but we can hope that they are the first sign.
The data on home prices includes information only through July 2008. The recent weeks of extreme turmoil in financial markets might have significantly affected the house prices. We will be able to see the effect of the recent events approximately two months from now, when S&P/Case-Shiller Home Price Index releases the data for September.
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