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Home Prices Take Steeper Downturn

Third-quarter home prices dropped 1.7% from prior quarter, largest drop in 21-year history - S&P Case/Shiller.

By Les Christie, CNNMoney.com staff writer

November 27 2007: 11:44 AM EST

NEW YORK (CNNMoney.com) -- Home prices have fallen steadily since July 2006, but plunged even more steeply in the third quarter, according to a report released Tuesday by S&P Case/Shiller.

According to the Case/Shiller index, which covers 20 local markets and a national average, third-quarter home prices dropped 1.7 percent from the second quarter.

The housing market could possibly get a lot worse, according to Yale economist and index co-founder, Robert Shiller. He was asked at a press conference following the release of the latest index data whether housing price increases, which had far outstripped income gains, could revert back to more normal ratios.

Shiller said, "You're talking about [home-price] declines of 50 percent, in real terms. That's not out of the question."

Referring to the latest declines, Shiller said they were notable for two reasons. "First, the third quarter decline, at 1.7%, was the largest quarterly decline in the index's 21-year history. And, second, the year-over-year decline posted its second consecutive record low at minus 4.5%."

The index, which many experts consider the most accurate snapshot of home price trends, revealed that prices peaked in the summer of 2006 and have fallen 5 percent since then.

Home price growth started to slow in November 2005 and turned negative in August 2006.

Of the 20 markets covered, 15 showed negative returns and all 20 had negative returns for September, compared with a month earlier.

Worst hit was Tampa, Fla., where prices fell 11.1 percent compared with a year earlier. The second biggest loss was in Miami, where prices fell 10 percent from a year earlier.

Charlotte, N.C. and Seattle showed the highest year-to-year gain of 4.7 percent each. But Charlotte declined 0.6 percent in September and Seattle prices fell 0.2 percent.

The housing cycle is very important to the business cycle, according to Shiller. Most economic recessions are preceded by housing declines and residential construction is an important leading indicator for the economy. The weakness in the housing market is causing him to wonder whether the nation could slip into recession.

Shiller conceded that most economists are still optimistic; employment is strong, consumer spending robust and the weaker dollar has increased exports. But, there's a big question in his mind whether subprime problems will lead to a retrenchment in consumer demand.

According to Shiller, the current situation is unprecedented - there's never had been a housing boom quite like the one that ended last year - and how we come out of the bust is anyone's guess.

"We are in the aftermath of the biggest housing boom in history," he said, "and, even though a lot of peoples' models don't reflect [the problems], I think there's a significant chance of recession, over 50 percent."

"Needs TLC"

When you see this in the description on an MLS listing this is what if means:

For Buyers - It means that you will have to do updating and maintenance to the home. Often times this means the Kitchen, Bathrooms, Roof, Furnace, or Siding could need to be repaired or renovated. Unless you know a good contractor you might want to steer clear of these houses.

For Sellers - If your Real Estate Agent puts this in the description on your home's MLS listing than you should know that this could limit your home's marketability. I would suggest discussing what is going to be in the description of your home before they enter it in the MLS because some home buyers will not consider your home if it 'needs TLC'.

Hope you find this useful!

Joe Cameron, Gateway Realtors & VBM Appraisals
www.JosephLCameron.com

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Joe Cameron, Gateway Realtors GMAC & VBM Appraisals

Now Is A Great Time To Buy!

I know everyone thinks they should wait, after all the television never lies, but now is a great time to buy a house! The slower 'winter market' is often filled with good deals and motivated sellers. This market makes sellers fearful that their house will not sell until the busier 'spring market.' To an educated buyer this seller mindset means great deals!

There are also many houses the banks are foreclosing on in our area. These houses are being practically given away to any buyer that makes a decent offer. Being an appraiser and knowing the local market I've seen houses that have sold for $30k+ lower than market value just because the banks want to get rid of them.

Now is a great time to buy a home! Don't be scared, just ask the correct questions! If you have any questions just let me know!

Joe Cameron, Gateway Realtors & VBM Appraisals

The Current State of Bergen County NJ Real Estate

Thanks for checking out my blog! I've been a Real Estate Agent and Real Estate Appraiser in Bergen County for a while now and started this blog as an outlet for me and a source for you. I frequently learn new and interesting bits of Real Estate Info for the county I do business in and have set up this blog to convey that information.

I hope this blog is able to be your #1 source for all New Jersey Real Estate Info! If you have and topics or questions you would like and expert's view on please don't hesitate to e-mail them to me and I'll post a reply as soon as possible. Thanks in Advance!




Joe Cameron, Gateway Realtors GMAC & VBM Appraisals