U.S. home prices continued to plunge in January

U.S. home prices continued to plunge in January
By Michael M. Grynbaum -- Published: March 25, 2008


NEW YORK: Home prices across the United States continued to plunge at record rates in January, a private survey released Tuesday showed, and economists said the slump was probably worse than at the height of the last housing recession in the early 1990s.

The fresh evidence of deterioration in the U.S. housing market came as a measure of consumer confidence reached a five-year low, buffeted by gyrations in financial markets and fears the United States may be sliding into a recession.

The value of single-family homes plummeted 10.7 percent in January compared with a year earlier, as measured by the Standard & Poor's/Case-Shiller index, a leading gauge of 20 major metropolitan regions.

The decline was the steepest year-over-year since the index began eight years ago, and reflected a wide-spread deceleration in values.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," Robert Shiller, chief economist at MacroMarkets and co-developer of the index, said in a statement.


Another housing index published Tuesday by the U.S. Office of Federal Housing Enterprise Oversight, showed home prices continuing to fall, but less sharply across the United States. The decline nationwide was about 1.1 percent from December to January, and 3 percent from a year earlier.

"The weakness is not contained to the bubble areas," Michelle Meyer, an economist at investment bank Lehman Brothers in New York, told Reuters. "It has spread to the rest of the nation."

As housing prices tumble, some economists see a silver lining: The decline may help to lure buyers back into the beleaguered market, where sellers are struggling under a wave of foreclosures and a tight credit market that has made it more difficult for many Americans to take out mortgages.

Inventories have ballooned as purchases have dried up, as buyers hold out for prices to fall even further.

Yet the slide in home values has been compounded by a general sense of gloom about the economy.

Confidence among consumers unexpectedly fell this month, dragged lower both by eroding asset values and concern that business and employment conditions will worsen before they improve. A quarter of those surveyed in an index created by the Conference Board, a private research group, said they believed businesses conditions would worsen in the next six months, and nearly a third said the economy would have fewer jobs.

The index slumped more sharply than expected, to 64.5 from 76.4 in February. A value of 100 represents the level of confidence in 1985.

The positive sales figure led some analysts to suggest that the housing market is approaching its bottom. But many economists predict that prices will fall for several more months before sales pick up in earnest.

"It's a necessary thing," said Joshua Shapiro, the chief U.S. economist at MFR, a New York economic research firm. "It's like the mess going down in financial markets. You gotta get through it. The sooner you get through it you can look for better times."

All 20 regions included in the Case-Shiller survey Tuesday recorded price declines, with Sun Belt cities like Las Vegas; Phoenix, Arizona; and Los Angeles suffering the worst losses in January. Prices in Miami and Las Vegas have fallen nearly 20 percent in the 12 months ending in January.

In the New York metropolitan area, home values fell just 0.9 percent in January, and 5.8 percent compared with a year earlier. But the drop-off appeared to be gaining speed: values were down nearly 10 percent on a three-month annualized basis.