US Home Prices Plunge Record 16.6% in August

Prices of U.S. single-family homes plunged a record 16.6 percent in August from a year earlier and plummeted more than 30 percent in Las Vegas and Phoenix, Standard & Poor's said on Tuesday.

Home prices in 20 major metropolitan areas fell 1.0 percent in August from July, according to the Standard & Poor's/Case-Shiller Home Price Indices.

The composite index of 10 metropolitan areas declined 1.1 percent in August from July for a 17.7 percent year-over-year drop, also a record, S&P said in a statement.

"The downturn in residential real estate prices continued, with very few bright spots in the data," David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, said in the statement.

A huge supply of unsold homes, tighter lending standards and record foreclosures have pushed down home prices, deflating a bubble from the early part of this decade.

For the fifth straight month, prices fell in every region on an annual basis, he said.

Both the 10-city and 20-city indices have fallen from a year earlier for 20 consecutive months. In 13 cities, annual returns worsened from last month's report, he said. "As seen throughout 2008, the Sun Belt markets are being hit the most."

AP

Prices in Miami, San Francisco, Los Angeles and San Diego all dropped in excess of 25 percent, he said.

The sharp declines in these regions of the country are in stark contrast to other areas, according to Michelle Meyer, an economist at Barclays Capital in New York.

"It is interesting to see the split in home prices on a regional basis and it is clear certain areas are bringing down the national average," she said.

The previously "bubble" areas, which had a large presence of risky lending and speculation, are struggling with a rising share of foreclosures, which have boosted sales but have depressed home prices, she said.

"Home prices continue to fall sharply in these areas, but prices have started to stabilize or even increase in other areas," she said.

For the August/July period, prices rose in only 2 regions, Cleveland and Boston, S&P said.

S&P noted one bright spot as the acceleration in decline was only moderate in August from July.

That is perhaps a glimmer of hope for the hard-hit U.S. housing market as it may indicate that the precipitous drop in home prices could be abating.

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Indeed, the 1.1 percent month-over-month price drop in the 10-city index is in line with the trend in recent months, but less than half the pace recorded in the first quarter, when prices plunged in response to the drop in sales after the start of the credit crunch, according to Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Assuming prices continue to fall at this pace, the year-over-year rate will bottom out close to its current rate in October and will then rise over the next few months, though it will remain double-digit negative for the foreseeable future, he said in commentary published Tuesday.

Standard & Poor's/Case-Shiller Home Price Indices have shown more severe declines in prices than other reports.

U.S. home prices fell 0.6 percent in August versus July, the Federal Housing Finance Agency said last week.

For the 12 months ending in August, U.S. home prices fell 5.9 percent, and the cumulative decline since the April 2007 peak is 6.5 percent, according to the FHFA's House Price Index.

(Watch the accompanying video for more on the housing numbers...)

Low prices, however, have been luring potential home buyers, a bright spot in a market suffering its worst downturn since the Great Depression of the 1930s.

The National Association of Realtors last Friday said U.S. sales of existing homes rose 5.5 percent in September to an annual rate of 5.18 million units. The Commerce Department on Monday said U.S. sales of new single-family homes rose 2.7 percent in September to an annual rate of 464,000 units.

Given deep discounting due to foreclosures and the wide imbalance between home sales and inventory, home prices are expected to fall further, Meyer said.

National home prices, based on the monthly trend, will probably fall at a faster pace in the third quarter than in the second quarter, even after accounting for seasonal distortions, with the downward pressure on home prices to continue through the end of next year, she said.

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