US Housing Prices Fall and More Declines Seen for 2008
US home prices registered their sharpest quarterly decline since the S&P/Case-Shiller® Home Price Indices were created 21 years ago, Standard & Poor’s said in announcing the figures for the July-September quarter. And an analysis by Global Insight sees a further decline of 7% in 2008.
The third quarter decline of 1.7%, was the largest quarterly decline in the index’s history, and the year-over-year decline posted its second consecutive record low at -4.5%. Most of the metro areas continue to show declining or decelerating returns on both an annual and monthly basis.
All 20 metro areas were in decline in September over August. Even the five metro areas that still have positive annual growth rates — Atlanta, Charlotte, Dallas, Portland and Seattle — show continued deceleration in returns.
While Tampa remains the metro area with the largest annual decline, at -11.1%, Miami surpassed Detroit in September, reporting a decline of 10% over the past 12 months. Detroit and San Diego followed with -9.6% each. While the mix is slightly different, once again eight of the 20 metro areas reported their lowest recorded annual returns – these cities are Atlanta, Chicago, Las Vegas, Miami, Minneapolis, Phoenix, San Diego, Tampa, & Washington D.C.
Meanwhile the US Conference of Mayors unveiled today an economic impact report on the foreclosure crisis that forecasts sharp losses in the growth of gross domestic product and projects economic output losses for 361 metro areas — referred to as gross metropolitan product (GMP). The total GDP growth loss equals $166 billion, with the combined economic loss of the top ten metro areas exceeding $45 billion.
Prepared by Global Insight, the report projects that home prices will fall 7% on average next year, the foreclosure crisis will result in 524,000 fewer jobs being created and a potential loss of $6.6 billion in tax revenues in ten states.
While the report stops short of forecasting a recession, 128 metro areas will be pushed into a “sluggish” GMP growth of less than 2 % in 2008
The report, The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas, found that weak residential investment, lower spending and income in the construction industries and curtailed consumer spending resulting from decreased home equity will have “multiplier effects” on the nation’s economy. Other report findings include:
- The foreclosure crisis alone will reduce home values by an additional $519 billion in 2008, bringing the total forecast of lost equity for the nation’s homeowners to $1.2 trillion.
- In 2008, the economy will grow at a rate of 1.9%, a full percentage point lower than would have been the case without the mortgage crisis.
- Foreclosures will increase by at least 1.4 million in 2008; these homes represent a market value of $316 billion.
- In ten states, representing a cross section of the US, the aggregate loss in tax revenue will equal $6.6 billion.
- Home price declines across the US will average 7% in 2008, ranging as high as 16% in California.
- Consumer spending will slip to 2% growth, well below a 3.1% gain in incomes.
- Housing starts will continue to decline until the second quarter of 2008, when the annual rate housing starts will be just 800,000, a drop of almost 20% from current levels.
- Sales of existing homes also will continue to fall by another 10% in 2008.
You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
