Home prices fall most in 20 years

Home prices fall most in 20 years
Copyright © 2007, Chicago Tribune
August 29, 2007

NEW YORK - U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since Standard & Poor's began its nationwide housing index in 1987, the research group said Tuesday.

The decline in home prices around the nation shows no evidence of a market recovery anytime soon, one of the architects of the index said.

Robert Shiller, chief economist at MacroMarkets LLC, said the decline of the residential real estate market "shows no signs of slowing down."

The report came a day after the National Association of Realtors said sales of existing homes dropped for a fifth straight month in July while the number of unsold homes shot up to a record level.

The S&P/Case-Schiller quarterly index tracks price trends among existing single-family homes across the nation compared with a year earlier.

The report also showed that prices in June in 20 U.S. metropolitan areas fell 3.5 percent from a year before. The decline compares with a 2.9 percent year-over-year drop in May.

After five years of rapidly rising home prices the market stalled last year, with prices holding steady or falling as sales slowed. Since then lenders have made it more difficult for some people to get mortgages by tightening standards just as foreclosures rise and some who borrowed at adjustable rates are facing higher payments they cannot meet. Problems have spread from those with poor credit repayment histories to more creditworthy borrowers.

"Given the tightening in underwriting standards and the credit freeze, it's going to be very difficult for buyers to purchase homes," said Mark Zandi, chief economist for Moody's Economy.com.

Fifteen of the cities surveyed for S&P's 20-city index showed a year-over-year decline in prices in June.

Prices in Boston dropped in June at a slower rate than they did in May, continuing a trend that started at the beginning of the year. In April 2006 Boston was the first metropolitan area to show a year-over-year decline, so any turnaround there could be an early sign of recovery.

Detroit led the cities with the biggest price declines, with an 11 percent drop from June 2006. Other cities with falling prices included Tampa, San Diego and Washington, which all recorded drops of at least 7 percent.

Seattle and Charlotte were on the small list of cities where prices rose in the same period.

Prices in Chicago edged down 0.7 percent.