money.cnn.com/2008/07/28/real_estate/another_home_price_dip/index.htm?cnn=yes
It was the 22nd consecutive month of decline recorded by the index. Prices fell 09% 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. 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. The 20-city index's Sun Belt cities, which recorded the biggest price gains during the boom, have led the charge down. Midwest metro areas, which have endured tough economic times for years, are also feeling the pain. Northeast cities like Boston, down 62% for the 12 months, and New York, off 79%, have been less volatile than the Sun Belt. The smallest year-over-year declines were recorded by Charlotte, NC (down 02%), Dallas (down 31%), and Denver (down 48%).
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. 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 15% decline, while the 20-city index fell just 09% in May after dropping 13% in April. But that 09% 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. "There's still strong downward movement," he said, "but it's not as rapid as earlier in the year." "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. 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. "What I look at is the Census Bureau's inventory of vacant homes on the market.
Historically, vacant homes have made up about 17% 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. 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.
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.
Confessions of a subprime lender In his new book, author and ex-lender Richard Bitner owns up to some of his worst mistakes, offering an inside look at how his firm issued bad mortgages.
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