Just when it looked like housing prices were bottoming out and now was the time to snap up the best bargains around comes news that may make you want to cool your heels. The latest updates on the S&P/Case-Shiller Home Price Indices were released on Tuesday, and they paint a picture of deteriorating prices that have continued to descend.
The S&P/Case-Shiller U.S. National Home Price Index fell 4% in the fourth quarter, compared to the same period in 2010. Meanwhile, Case-Shiller’s 10-City Composite was down 3.9% in December compared the previous year, while the 20-City Composite dropped 4%.
All three composites hit new post-housing-crisis lows. Moreover, the metropolitan city performance was worse than November, when the annual level for housing prices in both the 10-City and 20-City composites each fell 3.8%, according to the report.
David Blitzer, S&P Indices managing director and chairman of the Index Committee, provided the narrative behind the numbers in a statement: “After a prior three years of accelerated decline, the past two years has been a story of a housing market that is bottoming out but has not yet stabilized. Up until today’s report we had believed the crisis lows for the composites were behind us, with the 10-City Composite originally hitting a low in April 2009 and the 20-City Composite in March 2011. Now it looks like neither was the case, as both hit new record lows in December 2011.”
Economists point to an abundant supply of homes for sale and a large backlog of foreclosed homes as contributing to the declining prices. It’s a simple case of supply and demand, and currently supply is bulging.
The National Composite, meanwhile, is down a whopping 33.8% from its peak in the second quarter of 2006, just before the housing crisis began.
Among the 20 major metropolitan areas, Detroit was the only one to post a year-over-year gain in December. That strength was also seen in the Motor City’s results in November. Atlanta, meanwhile, posted another double-digit decrease in housing prices and maintained its status as the nation’s hardest-hit city based on its annual rate of decline.
Here’s a look at how the nation’s top 20 cities fared in December, compared to year-ago figures:
S&P/Case-Shiller Home Price 20-City Composite Index
METROPOLITAN AREA 1-YEAR CHANGE (%)
LAS VEGAS -8.8%
LOS ANGELES -5.2%
NEW YORK -2.9%
SAN DIEGO -5.4%
SAN FRANCISCO -5.4%
WASHINGTON, D.C. -1.6%
COMPOSITE-20 CITIES -4.0%
Although sales of existing homes are on a rise, Blitzer and other economists warn it doesn’t necessarily mean folks should expect home prices to follow.
Blitzer, in a previous interview with The Motley Fool, noted: “Home prices are usually one of the last things that improve. First, you’ll usually see more foot traffic [with prospective buyers], then you’ll see sales improve and then prices will begin to move up.”
That last leg of prices moving up, however, may be awhile in coming.
Source: S&P Indices and Fiserv
I’m not surprised at all, as a matter of fact if you read the original threads from a few years ago, I was pretty much sure that prices were going down, and I really don’t know when this is going to stop. I told everybody that would listen (and way more that wouldn’t listen) that the real reason for this housing collapse was high energy prices, and here we go for another round, with gas already at $3.50+, a new record for this time of the year. The high prices are, of course, a result of stagnant world oil supply coupled with increasing demand from the China, India and some other “developing” nations. And not ignoring the ELM(Export Land Model) which postulates that as oil producing countries become rich from the high prices, their use of their oil goes up, cutting back on available exports.
Not to blow my own horn, but I’ve been talking about peak oil for almost 7 years now, from back in the days before Katrina and Rita blew into the Gulf of Mexico and caused an oil price spike to (gasp) $70 a barrel! I don’t think we’ve peaked just yet, but production growth has slowed to a crawl, and some smart people are saying last year or this year might be the absolute peak. We have already seen a mild preview of what high oil prices do to our growth at all costs economy, and how our government has reacted to the economic slowdown (bailing out the banks and corporations, and screwing the working/middle class).
I hope some of you listened to the good advice in these threads and are in a better position today than 5 years ago to weather this long emergency. Unfortunately for me, personal circumstances have eroded my ability to prepare for the coming worsening storm, but maybe I’ve helped people in some way understand and prepare for what’s coming.
Ya know, in my mind three things are tied together. The money created as debt system drives unending growth, until resource constraints are hit (peak oil) and collapse starts. Meanwhile religion erodes people’s critical thinking and makes them accept the assurances from our corporatocracy that everything is going to be all right, just keep spending(a.k.a “consumer confidence”), in spite of the evidence of common sense, which dictates that a grow or die economic system can’t be sustained in a finite environment like Planet Earth.
It’s going to be a tough year. I hope we all make it through with our jobs and finances relatively intact. I really wish our corrupt government doesn’t decide to let Israel bomb Iran, because that would be a collapse event for us.
But what the hell, try to have fun anyway. Life isn’t about what happens to you, it’s about how you react to what happens to you!