S & P: "No evidence of a bottom" in housing

The Case-Shiller index of home prices showed the 10th month in a row of record-setting price declines in July, with prices in Los Angeles falling 26.2% from July 2007 to July 2008.

Standard & Poor's, which publishes the monthly index, noted that pace of price declines is slowing, but there is, "no evidence of a bottom" in housing prices. S&P economist David Blitzer: "Little positive news can be found when cities like Las Vegas and Phoenix report annual declines as large as 29.9% and 29.3% respectively, and all 20 cities are still in negative territory on a year-over-year basis."

The Case-Shiller index of 20 large cities showed price declines of 16.3% in the year ending in July, and the index of 10 large cities showed declines of 17.5%.

The index does not translate into a dollar amount for average or median home prices. Some analysts believe it probably overstates price declines on a national basis because the index measures prices in large cities, where the housing bubble was more pronounced.

-- Peter Viles

Your thoughts? Comments? E-mail story tips to Peter Viles.

Comments

[bkl]

LA numbers:
Peak (9/06) 273.94
July 2007 260.84
July 2008 192.55

Decline from Peak 29.7%
Decline in last year 26.2%

[Rich]

"Some analysts believe it probably overstates price declines on a national basis because the index measures prices in large cities, where the housing bubble was more pronounced."

Agreed, but what should capture our attention now is that this bailout bill wrangling, even if it ends in a bill being passed, is likely to introduce such constipation in the lending market that the monthly sales numbers for this month and next may be the worst yet. October is also supposed to be the last month of big ARM resets which will result in a spike of foreclosures through the Winter. For everyone who wanted severe reductions from bubble pricing, be careful what you wish for--in the building recession you may not have a job to support that mortgage before this is through...

[SevenHundredBillion.com]

The prices are still way too high if compared with incomes, in my opinion LA will be 60% down before all is over. Westside is almost untouched but again, it's not in line with incomes so adjustments will have to take place there as well.

[Jonathan]

Good. Housing is still too expensive in LA County. May it fall another 50%

[jfranchino]

"Some analysts believe it probably overstates price declines on a national basis because the index measures prices in large cities, where the housing bubble was more pronounced."

That might be a fair criticism:
Population of Case-Schiller's 20 cities: about 33.7 million, or about 10% of the US population. The smallest cities are places like Tampa, Cleveland, and Minneapolis.

But perhaps the index is useful because it tracks data in the most volatile markets. An index tracking housing prices in towns less than 50,000 at least 100 miles from any towns over 100,000 would be interesting, but perhaps less useful when judging the health of the housing market.

These mortgages that are causing all the havoc... what was the average dollar amount? I'm guessing it's quite a bit more that the full price of a brand new house in most of the US. The lunatic fringe of the housing market drove the bubble. And say what you want about it, Ben Stein, that small portion just brought down how many banks?

[CD]

Start showing movies Peter. This is the long way down.

[Dave]

Not sure when it'll bit bottom but if the credit it tight, banks will only lend to people with good credit, 10% - 20% down and mortgage payment no greater than 32% of annual household income.

If the average income in California is around $55K, annual mortgage payment is around $17,600. If the #s are correct, average home should cost around $300K:

Home Value: $300,000
20% Down: $60,000
Loan Amount: $240,000
Interest rate: 6%
Annual payment: $17,400
Plus tax, insurance...etc.

I say another 25% to go (average listing price $399,000?)

[Tim K.]

Ultimately, the downfall of housing will be the one thing that will actually HELP get the flow of credit going again. Why?

Because the assets this bailout is supposed to purchase are ultimately based on these now lower priced homes. If the homes are priced so low that they begin selling again, the market value of these securities will be realized at their new, lower value (as opposed to these sky high fantasy values the banks think they are worth). Sure, lots of writedowns will ensue, but the value will be known and they will be moving again, although at a major discount.

This is *exactly* what this country needs to get on the right track. Housing that is CORRECTLY priced, workers who aren't overpaying for housing who then can plow their extra money into the economy and begin working at jobs that produce actual product instead of flipping houses.

This is the ultimate Economic Rescue - the reduction in housing costs.

[CompaJD]

Hey bk can you give us the S & P #s for 1996-1997?
That will give us an Idea of where we need to be.

[LA]

President Bush's statement today talks about passing the $700 billion bail-out so we can get back to the business of growth and job creation. Is he fooling anyone besides himself?

There is still a huge disconnect between reality and the information we're being fed by Washington.

NO BAIL-OUT. No re-election for those who support a bail-out.

[anonymous]

When the jumbo ARMS reset in the spring, there will be another wave of foreclosures in the jumbo market. Bottom will be next summer.

[TC]

Listen to TIM K. he speaks the fundamental truth to this whole matter.

Wanna make credit flow?? Then give them something to buy and back it up that is fundamentally sound.

Until the Working Class can get back in the home game, nothing will change all that much.

And another thing. Get rid of all these 3000 sqft homes and start building modest homes that are affordable and efficient to live in. Asking someone to pay 400 bucks a month just to AC their stucco barn of a home is beyond rediculous. Not to mention the 100 dollar water bill that comes from being a grass farmer.

My Grandparents' working class homes were 1300 sqft and well built.

Bottom comes in 2010 and takes it's sweet time recovering. If the government wants to help homeowners to stimulate all this, give us more tax breaks and let the homes plummet.

[Kevin Schmidtchen]

Tough news. There are so many different stats that sometimes it is hard to know what is true. One thing that seems hard to visualize is that some of these areas are seeing a drop to prices below what it cost to simply build the home.

In our area here in Santa Barbara CA. it is completely mixed with the high end seeing no drop to even some gains over the last 2 years (roughly $3.5 Millon Plus market) while the lower end is anywhere from 10-35% below the peak (roughly $300,000 to $1.2 Million market).

Kevin Schmidtchen
Sotheby’s Int’l Realty
805-689-6877
Blog: www.SantaBarbaraRealEstateVoice.com

[It All Happens on the Margin]

Kevin

there are so few sales - I'm frankly surprised you're seeing that much of a drop.

Comps imply enough sample space and similarity to a subject property - there's simply not enough variation in the high end comps to draw any significance from them, because sales volumes are off a cliff. Soon, pricing will be, too - it takes several months of "low ball" (some say "realistic") offers, realization of tightened (some say traditional) credit, and a few 800 point drops in the dow for sellers to capitulate.

Don't worry. It's coming.

[latesummer2009]

Westside will not be immune. With credit freezing up this month, it won't be until the November report of Case Schiller that really shows the damage. Melissa Data will give you current sales information, followed by Dataquick about 3 weeks later.

With little or no financing, there will be even less sales than now. Prices in the most affluent areas will drop quickly, as the smart money bails.

To think this time is different is nothing more than DENIAL.

Westside is TRENDING down...

http://www.westsideremeltdown.blogspot.com

[aman mathur]

It is fair to say that a home buyer needs to pay at least 5% down and the family income needs to be no less than a third of the home loan. These were the age old basics that are still being followed in the majority of the countries in the world.
For those not up to it can respectfully rent.

Who started feeding the Americans all this non-sense about 'pride of ownership' ?

Second thing.
The guy who spoke about smaller homes is absolutely right.
What are you going to do with that 2500 S.F. home ? more greed ... more to feed. True conservatism is about financial discipline too.
Let there be natural landscapes and large lando ownerships but what is the need to cover every square feet with concerete or asphat or lawn ?

[Big Jim Slade]

Financial discipline? You're going to stick it to the new buyers because the old ones pulled a bunch of shenanigans?

Reminds me the guys that get flagged in football- always the second one involved in the incident.

Let me help you out. More stringent loans= lower prices.

Duh.

[tsingh]

The complete CS from recent is here:
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_History_093042.xls

[Sam]

I think property taxes should be put on holdaltogether for 5 years to stimulate growth of hosuing market.

[Lee Baldwin]

The Greed of the people in california caused the meltdown. Think Back. Was you home really worth 200%
Give me a break. I say no to Home Bail Out.
Just Wait for the Credit Card Crisis which is comming next.
People in california don't know what it is to leave in their means.
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