Home Prices Plunge Again in September
Dashing the hopes of consumers and experts, home prices dived in September, quashing any theory of the market leveling off. And they fell below analysts’ expectations.
According to the S&P Case-Shiller 20-city home price index, prices slipped 3.6 percent in September, when compared to the same year-ago period. Bloomberg analysts were expecting a 3 percent dip. The prices are now at the first quarter 2003 levels, according to abcnews.com. A separate report released by the Federal Housing Finance Agency shows that prices dropped 2.2 percent in the year ended September.The road ahead will be an arduous one, cautioned experts.
“Over the last year home prices in most cities drifted lower,” David Blitzer, chairman of the Index Committee at S&P Indices, said in a statement to the media. “The plunging collapse of prices seen in 2007-2009 seems to be behind us. Any chance for a sustained recovery will probably need a stronger economy.”
The hardest hit cities, in terms of monthly price declines, were Atlanta, San Francisco and Tampa, according to the Associated Press. In fact, prices in Atlanta, Las Vegas and Phoenix fell to their lowest levels since the advent of the housing depression. But not all cities were in mourning. Home prices inched upward in New York, Portland and Washington. The drop in prices is partly a result of consumers shying away from investing in homes despite historically low mortgage rates and sweet deals on prices. Economists blame high unemployment, strict lending practices and slow job growth for the poor showing.
In October, the number of people who said they plan to buy a home in the next six months dropped to 3.9 percent from 4.7 percent in September, according to Bloomberg. That’s the worst reading in almost a year, the report said. Prices are expected to fall again as banks pursue foreclosures aggressively after a yearlong hiatus, the AP said.
Construction Spending Rises
For the third straight month, construction spending increased in October, rising 0.8 percent to a seasonally adjusted rate of $798.5 billion, according to the Commerce Department. But that hardly calls for celebration, since the numbers are nowhere near the $1.5 trillion mark that economists consider as the sign of a healthy market. Construction of homes climbed 3.4 percent in October to an annual rate of $239 billion. The number of ground breaking for homes and apartment buildings were calculated at a seasonally adjusted rate of 628,000, and that too is roughly half the 1.2 million that the economists consider as sign of a healthy market, the Associated Press said. A silver lining in the report is that application for future building plans increased 11 percent in October. Most of that jump has been triggered by the apartment segment, which saw a 30 percent increase in permits, the highest level in three years, according to the AP.
New Home Sales Inch Upwards
Americans bought more new homes in October, a good omen for the market. Sales climbed 1.3 percent to 307,000 at an annual rate, but economists were hoping for a 315,000 rate, according to Bloomberg. New home sales have been taking a hit as the market gets clogged with foreclosures and short sales. A depressed economy with rising unemployment and depleting consumer confidence has also shrunk sale numbers.
“The housing market remains out of balance, with much more supply than demand,” Michelle Meyer, a senior U.S. economist at Bank of America Corp, told Bloomberg. “Builders are still competing with the significant overhang of existing homes for sale. Once we get past the overhang of foreclosed properties, single-family housing will turn around fairly rapidly, but we’re a good two years away from that.”
First-Time Homebuyers Shying Away
Despite low mortgage rates, falling prices and plenty of supply to choose from, first-time buyers are balking, says the Associated Press. This demographic includes young professionals and couples starting a new family, and their absence explains much of the agony plaguing the housing industry. According to the AP, Only 65.1 percent of households own homes. That’s the lowest since 1996. High unemployment, student loans, shrinking home values and tight lending practices are making first-time buyers wary.
Awesome blog post, thanks for it!
You’ve got some interesting thoughts on this which I like.