Home prices take the plunge
NEW YORK (AP) - January 29, 2008 The decline in the Standard & Poor's/Case-Shiller 10-city
composite home price index was the biggest year-to-year drop since
a 6.7 percent decrease in October. The November performance was the
11th straight monthly decline. The index tracks prices of existing
single-family homes in 10 metropolitan areas.
The broader 20-city composite index also was down
year-over-year, falling 7.7 percent in November.
Robert Shiller, chief economist at MacroMarkets LLC and one of
the architects of the index, noted that 14 of the 20 metropolitan
areas posted their single largest monthly decline on record in
November.
Miami led the pullback with a 15.1 percent decline, followed by
San Diego at 13.4 percent, Las Vegas at 13.2 percent and Detroit at
13 percent. Los Angeles, Phoenix and Tampa, Fla., also recorded
double-digit declines in November.
Only Charlotte, N.C., Portland, Ore., and Seattle posted
positive annual growth rates.
The index is considered a strong measure of home prices because
it examines price changes of the same property over time, instead
of calculating a median price of homes sold during the month.
It comes a day after the government reported that new home sales
plummeted last year by the biggest amount on record. The Commerce
Department said Monday that sales of new homes dropped by 26.4
percent last year to 774,000, marking the largest plunge since
1980.
The governmnet also said the median price of a new home edged up
only 0.2 percent in 2007 to $246,900, the worst performance since
prices slipped by 2.4 percent during the 1991 housing downturn.
After five years of booming home sales and prices, housing
stalled at the end of 2005 and turned into a serious slump last
year. Homebuilders and lenders have posted huge losses, while Wall
Street investors, including major national banks, have taken
billion-dollar write-downs on securities backed by mortgages.
The fear has seeped into the broader market, creating a squeeze
on all types of credit and curbing consumers' willingness to spend.
Economists worry the prolonged housing downturn could plunge the
economy into a full-blown recession.
The Federal Reserve has stepped in to stem the fallout by
slashing a key interest rate by 1.75 percent since September,
including an unexpected emergency three-quarter-point cut to 3.5
percent last week. The central bank begins its two-day meeting
Tuesday.
Also last week, President Bush and House leaders agreed on a
$150 billion economic stimulus package which included a plan to
increase the size of mortgages Fannie Mae and Freddie Mac and the
Federal Housing Administration can handle. But critics believe more
dramatic action is needed.
(Copyright 2008 by The Associated Press. All Rights Reserved.)