Home Prices Take Biggest Drop Ever in Third Quarter
Prices of U.S. single-family homes in September plunged a record 17.4 percent from a year earlier, according to the Standard & Poor's/Case-Shiller Home Price Indices issued on Tuesday.
The composite index of 20 metropolitan areas fell 1.8 percent in September from August, S&P said in a statement.
It said its composite index of 10 metropolitan areas declined 1.9 percent in September from August for a 18.6 percent year-over-year drop, also a record.
The U.S. housing market is currently suffering the worst downturn since the Great Depression. 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.
The U.S. economy is considered to be either in or on the brink of a recession, so most economists and experts contend that an end to the downward spiral in house prices is crucial to any recovery.
"House price declines have been at the root of the financial crisis and it appears, as of September, that this decline continued unabated," said Lawrence J. White, professor of economics at New York University's Stern School of Business.
"Until we have some kind of stabilization in the house price sector, we will continue to see problems in the financial sector," he said.
"House prices will probably drop another 10 percent, but I am hopeful that a bottom will be reached in the late spring of 2009," he said.
The rate of home price declines has accelerated on a quarterly basis too.
In the third quarter, the decline in the S&P/Case-Shiller U.S. National Home Price Index -- which covers all nine U.S. census divisions -- remained in double digits, posting a record 16.6 percent decline versus the third quarter of 2007. This has worsened from the annual declines of 15.1 percent and 14.0 percent, reported for the second and first quarters of the year, respectively.
The U.S. National Home Price Index dropped 3.5 percent in the third quarter from the second quarter.
"The turmoil in the financial markets is placing further downward pressure on a housing market already weakened by its own fundamentals," David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, said in a statement.
As of September 2008, the 10-City Composite is down 23.4 percent from its peak, the 20-City Composite is down 21.8 percent and the National Composite is down 21.0 percent.
Phoenix was the weakest market, reporting an annual decline of 31.9 percent, followed by Las Vegas, down 31.3 percent, and San Francisco, which was down 29.5 percent. Miami, Los Angeles, and San Diego did not fair much better with annual declines of 28.4 percent, 27.6 percent and 26.3 percent, respectively.