Home prices in many cities continued to plunge by record levels in January as sellers cut their asking bids and rising foreclosures took their toll, new data showed Tuesday.
While the spring selling season usually gives the market a bounce, some analysts say any notable improvement may not come until well into the summer. U.S. home prices fell 10.7 percent in January, and the Standard & Poor’s/Case-Shiller home price index of 20 cities saw the steepest decline in the index’s two-decade history.
Worst-hit were Las Vegas and Miami, both reporting 19.3 percent drops, as the regions are still paying the price for rampant speculation and overbuilding during the boom years. Those cities and 14 others, including Phoenix, San Diego and Detroit, posted record lows.
“I wouldn’t be looking for a pattern of improvement until April, May or June,” said Brian Bethune, Global Insight’s chief U.S. economist.
Only Charlotte, N.C., squeaked by as a gainer in the Case-Shiller index, with a 1.8 percent rise in January compared to a year earlier.
“We are still selling here in Charlotte,” said Dianne McKnight, a broker associate at Re/Max Executive Realty in the city. “If a property is priced right, it sells in a day and you have multiple offers. There are plenty of buyers out there kicking around.”
But the overall downbeat figures come on the heels of data released Monday showing that the median price of existing homes being sold in February fell in the largest year-over-year drop since at least 1999.
“Home prices continue to fall, decelerate and reach record lows across the nation,” said David Blitzer, index committee chairman at S&P. “No markets seem to be completely immune from the housing crisis.”
Blitzer said all 20 cities S&P tracks have seen falling prices for five consecutive months when compared to the prior month. What’s more, the declines are growing in severity, with 13 of the 20 cities reporting their biggest single monthly decline in January.
Pava Leyrer, president of Heritage National Mortgage in Detroit, said the tightening of loan standards has compounded the problems of too much inventory, foreclosures and worries over the economy.
“It’s just a spiral that will end up taking this year to get out of,” Leyrer said.
She said it would take until the spring of 2009 before they started to see the market in Michigan improve.
While the vast majority of homes in the U.S. are not in danger of foreclosure, the housing slump has raised concerns about a recession and has had ripple effects across the economy as consumers spend less in other areas and banks tighten lending requirements.
Consumer confidence sank to a five-year low in March as tight credit markets, rising prices and worsening job prospects deepened worries that the economy has fallen into recession. The Fed has aggressively slashed interest rates to spur growth and free up the credit markets.
A narrower survey, released separately Tuesday by the Federal Housing Enterprise Oversight said home prices fell 3 percent in January from the same month last year, and dipped 1.1 percent from December. The declines were sharpest in New England.
The monthly OFHEO index is down 4.1 percent since its peak last April. The index is calculated using mortgages of $417,000 or less that are bought or backed by government-sponsored mortgage companies Fannie Mae or Freddie Mac. Legislation enacted in February temporarily raised the limit to as much as $729,750 in high-cost areas.
Many sellers in some parts of the country seem to be cutting prices more aggressively. While sales of existing homes notched a surprise increase in February after falling for six straight months, the median price fell, according to data Monday from the National Association of Realtors.
The trade group said sales rose 2.9 percent last month to a seasonally adjusted annual rate of 5.03 million units — the biggest increase in a year. But the median existing sales price in February fell to $195,900, the largest year-over-year drop on records that go back to 1999.