No Sign of Bottom in US Existing Home Sale Prices
There was no sign of the US housing market hitting bottom in February as sales prices of existing single-family homes showed double digit year-over-year declines in 10 of the 20 markets included in the S&P/Case-Shiller Home Price Indices.
The 10-City Composite posted a new record low annual decline of 13.6%, and the 20-City Composite recorded an annual decline of 12.7%.
Prices in all 20 metropolitan statistical areas were down from the previous month and only Charlotte was up from a year earlier at +1.5%.
The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months. On top of that, the declines have remained steep with eight of the 20 MSAs and both composites reporting their single largest monthly decline in February.
Las Vegas and Miami were again the weakest markets with year-on-year declines of 22.8% and 21.7% respectively. San Francisco, Las Vegas and Los Angeles each were down more than 4% from the previous month.
More evidence that prices have further to fall can be found in a recent presentation by Desmond Lachman, Chief Economist of the American Enterprise Institute. In a panel discussion Monday, Lachman said further declines are indicated by futures prices based on the Case Shiller Indices and by the historically high level of unsold housing inventory. He also said expects “a burst in the commercial property market.”
He noted that interest rate cuts have been offset by widening credit spreads and that the stimulus package has been negated by higher oil prices. Therefore:
Further interest rate cuts and a second stimulus package are
required. Unorthodox measures are needed to stabilize the housing
market.
Another AEI scholar, former Fed official Vincent Reinhart said at the same panel that the rescue of Bear Stearns was “the worst policy decision in a generation,” Bloomberg reported.
“The panicked decision jumped over other possibilities” and may prove as damaging as Fed policy errors that caused the “great contraction” of the 1930s and the “great inflation” of the 1970s, he said.
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