Housing Prices Drop 4.5 Percent in Q3 2007, S&P Case-Shiller

Housing prices fell the most in almost 20 years this summer, and consumers remain deeply skeptical about the economy, according to reports released yesterday.

Prices of single-family homes in the third quarter fell 4.5 percent nationwide compared with a year ago, according to the Standard & Poor’s/Case-Shiller National Home Price Index. It was the largest drop since records for the index began in 1988.

A separate survey by S.& P./Case-Shiller of home prices in 20 major metropolitan areas showed a drop of 4.95 percent in September from a year ago, the biggest decline in more than six years. Prices declined 0.9 percent in September alone, and were down in all 20 areas, the survey found.

The Case-Shiller surveys are widely followed by investors, though many market watchers are looking to this week’s reports on sales of new and existing homes in October. The three surveys are expected to provide a decidedly bleak portrait of the current housing market.

A steady rise in foreclosures tied to the struggling mortgage market has weighed down housing demand, and tightened lending standards have made it more difficult for Americans to get home loans. The result has been a steady drop in value.

“We are fast approaching the rate of price decline seen at the end of the 1990-91 recession,” Joshua Shapiro, chief United States economist at MFR, wrote in a research note. “The odds strongly favor blowing past this mark in coming months.”

An index of consumer confidence, meanwhile, fell to 87.3 in November, a sharper-than-expected drop, reaching to its lowest level since October 2005, the Conference Board said yesterday.

In housing, Miami, San Diego and Phoenix recorded the steepest monthly declines in single-family home prices in September, all in excess of 1.5 percent.

Prices in the New York City area dipped 0.3 percent in September, after a 0.7 percent drop in August. They are down 3.64 percent over the last 12 months.

Patrick Newport, economist at Global Insight, a research firm in Lexington, Massachusetts, said that home prices were dropping more sharply on the less expensive end of the housing market, the sector most significantly hurt by the subprime collapse.

“The subprime problems are a little bit messier than we thought,” he said.

Home Prices Post Big Drop in Survey
By MICHAEL M. GRYNBAUM | New York Times