Home Values Fell at 6.7% Rate in First Quarter
Source: BIG BUILDER News
Publication date: June 2, 2008
A fourth indicator of the nationwide decline in home values this morning joined the National Association of Realtors, S&P/Case-Shiller and the federal Office of Housing Enterprise Oversight Global Insight in reporting a steep drop in single-family home prices during the first quarter.
Global Insight, the economic forecasting firm based in Waltham, Mass., in partnership with National City Corporation, the Cleveland based holding company which owns banks, on Monday morning reported that median single-family home prices fell at a 6.7% annualized rate during the first quarter of this year, marking the third consecutive quarter of declines.Nationwide, 262 markets of 330 in the study experienced declines, accounting for 84% of all housing units and 89% of real estate value.
The 330 markets in the study represent 78% of all housing units and 93% of all related real estate value in the U.S., making this study, which is now in its third year, the most comprehensive of its kind. The valuation data are extrapolated from U.S. Census Bureau and OFHEO statistics and compared with economic data including household population density, mortgage interest rates, relative income levels and characteristics unique to the history of each metro area.
The study reported that median prices are now down 3.1% from a year ago and 3.6% from the second-quarter-of-2007 peak. In its explanation of methodology, Global Insight points out that “housing markets tend to adjust very gradually and price declines, when they occur, have historically averaged 18 quarters in duration.”
California, Florida and Michigan posted the steepest losses in the study and contained 45 of the 50 worst performing metro areas. Merced, Ca. leads all markets in the current downturn with a 38% correction in house values over the past eight quarters, followed by Stockton at 36%; Modesto at 35%; Santa Barbara and Yuba City at 32%; Salinas at 31% Sacramento at 30%; San Diego, Oxnard and Santa Rosa at 26%; Fresno at 25%; and Oakland, Santa Ana, Napa and Riverside, all at 24%.
Among Florida markets, the correction leader in the first quarter was Cape Coral/Ft.Myers with a 28% correction over the past nine quarters, followed by Punta Gorda at 27%; Sarasota at 26%; Port St. Lucie and Vero Beach at 25%; Palm Bay/Melbourne at 23%; and West Palm Beach at 21%.
Leading the Michigan market correction was Detroit, at 21%; followed by Ann Arbor and Warren at 20%; Flint at 19%; and Saginaw at 15%. be dang, ain’t dat a spicy meataballa with another course of pasta expected to follow.
This study, called “House Prices in America,” goes a step further than the other home-price indicators in predicting where home prices remain overvalued and are likely to decline in the future, defined as markets that are overvalued by 35% or more. The number of such markets was down to eight from a peak of 53 in 2006. The markets included Atlantic City, N.J.; Bend, Or.; Longview, Wa.; Wenatchee, Wa.; Ocean City, N.J.; Bellingham, Wa.; Portland, Or.; and St. George, Ut.
Markets that have reverted to fair valuations from overvalued include the Northeast, coastal California and Florida.
“The housing market will take some time to recover as consumers are constrained not only by tighter credit standards, but rising costs in other areas of the economy,” said Jeannine Cataldi, senior economist and manager of Global Insight’s Regional Real Estate Service . “There is also excess supply that needs to be absorbed, plus the rate of foreclosures entering the market needs to slow before housing can begin to pull out of its current downward trend.”
Taking a brigther view was James Diffley, group managing director of Global Insight’s Regional Services Group, who said, “The large price adjustments we have seen are precisely what was required before we could begin to talk of recovery.”
Replies
rez,
All of those markets mentioned were driven up by unreasonable speculation.. Minnesota was differant. We're had a strong diverse economy in the past and our housing market lagged behind need, well behind need..
Right up to about three years ago.. Attracted by our higher demand we were flooded with builders from around the country anxious to get in on the gravy train.
Suddenly there were plenty of willing builders, few buyers and a history of quick sales.. so builders took out loans to build spec homes.. Up to about 2 1/2 years ago few spec homes were built. Suddenly every home was a spec home and we wound up with a flood of spec homes (in excess of 33,000 in the metro area alone) just as the flood of easy money dried up.
With the additional homes finished over the past year and few sales, we currantly have over 5years worth of new homes on the market not to mention the tens of thousands of existing homes seeking buyers..
I know of countless new homes celibrating 2nd birthdays without a single offer. New Condo's built at the cost of 10's of millions have a rare occupant or worse renter. Since they occupy land that was previously used for viable businesses, The loss in income to the tax base is significant..
And GM just announced to closed one of your truck plants today?.
.
"Thank goodness for the Democrats! If you are terminally unemployable, enjoy living off of govt welfare and feel you owe society nothing you're in luck: there is a donkey waiting for you."
"All of those markets mentioned were driven up by unreasonable speculation.. "Nope. Detroit has been relatively flat since Clinton was in office. There was no speculation "runup". Bob's next test date: 12/10/07
thats important. i think that markets that went up and then went back down have a chance of going back up again (maybe like crazy) but markets like detroit that collapsed with no "run up" or speculation are just plain dead.
Detroit may have to reinvent itself to survive.
I live in a part of upstate NY that for years was in decline, today we are holding steady and growing slowly. What this means is we did not have a huge runup in home values. This means that people look at their house a a place to live in and not make money. Yes there is some price appreaciation around 3% last year in a US market that averaged a downturn.
As far as the tremendous price appreciation, we never had it , therefore we don't miss it.
These numbers that get floated around are averages, which means there are a lot of the country that hasn't gone down, or gone up slightly.
segundo,
Look to the underlying economy as to the nature of run up. Basically how much can people make. That tells you how much they can afford to pay for property.
If the local basic economy is strong and likely to continue to remain strong prices can rise all out of proportion to national trends.. conversely The rust belt states with their loss of industry will suffer greatly and either drop or remain stagnant.
Resorts and water front locations will continue to be in demand all out of proportion to their value. But those in the rust belt states will remain moderate compared to southern and more tempurate climates..
And GM just announced to closed one of your truck plants today?
You're probably thinking of the truck plant in Janesville, Wisconsin. Ford has a plant in St. Paul where they build all the Ranger (and Mazda) pickups that's scheduled to close in a year, but the state is pushing on Ford to keep it open - since the Ranger gets decent mileage when compared to a F150, it's still selling reasonably well.
Stuart,
In addition the St. Paul plant has a history of profit.. something Ford needs desperately today to survive at all. Part of it is the fact that they supply their own electricity with a dam on the Minnesota River. That fact should make St. Paul a unique spot to build hybred vehicles..
However Ford is focused on moving all manufacturing to Mexico and is looking outside of America for all future developments..
ya gotta love it. completely built outside of usa. i sure am glad i bought a toyota!
segundo
Many of those who own much of America dispare over investing here.. and are quickly moving to off shore manufacturing.. in effect killing their own golden goose for short term gain..