Home Prices, Confidence: My "Creeps" Come A Day Early
CNBC Real Estate Reporter
I’m not surprised consumer confidence is down, given the fact that home prices are falling fast. I know a lot of you out there in the blog-o-sphere don’t like it when I talk about these monthly price, sales or foreclosure reports, but it’s the bread and butter of the business, so humor me, if you will, especially because this one is a doosey.
Today, S&P/Case Shiller released its monthly Home Price Indicesfor the top ten and top twenty metro markets in the country. You can read the whole report yourself, but frankly I think one sentence sums it up. “Remarkably, in August, eight of the 20 metro areas reported their lowest recorded annual returns—these cities are Cleveland, Las Vegas, Miami, Minneapolis, Phoenix, San Diego, Tampa and Washington, DC.”
Now granted, several of these were the boom cities, Miami, Tampa, San Diego, Vegas, whose prices were fueled by investors who never intended to live in the properties they bought. But then I see cities like Minneapolis and Washington, DC; the former is not what I would call a hot investor market, and the latter is bolstered by one of the strongest local economies in the country (government is always growing, like it or not). The inclusion of these two cities in the other list makes me nervous, and not just because I live in DC.
We’ve been talking a lot on the blog about saving borrowers who are in danger of default. Countrywide stepping up to the plate, etc., but if prices continue to correct this deeply, the number of borrowers in distress is only going to rise, because they won’t be able to sell their homes for enough money to pay off the mortgage, and they won't be able to refinance because their mortgage will be worth more than their house. So many people are going to be sitting on negative equity with no place to go.
Now I know you can argue that the bulk of Americans didn’t purchase a home in the last 6 years, so the price fluctuations really don’t mean a thing. But a lot of folks did, and a lot of investors bought into all those new mortgages.
And even if you didn’t buy a home recently, which I didn’t, you probably took some equity out for a new bathroom or kitchen or car, so there goes all your consumer confidence right there, because you’re now paying for equity that you used but that no longer exists.
Don’t mean to be scary on this all hallows eve, but this report gives me the creeps.
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