Single-family housing market `remains grim,' index official observes

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U.S. home prices post their biggest drop ever TheStar.com - Business - U.S. home prices post their biggest drop ever

Single-family housing market `remains grim,' index official observes

December 27, 2007

NEW YORK–U.S. home prices fell in October for the 10th consecutive month, this time posting the biggest drop ever, according to a key index.

The record 6.7 per cent slide in the Standard & Poor's/Case-Shiller home-price index also marked the 23rd consecutive month that prices either fell or grew more slowly than the month before.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim,'' Robert Shiller, who helped create the index, said yesterday.

The October decline surpassed the previous record of 6.3 per cent in April 1991. The index tracks prices of existing single-family homes in 10 metropolitan areas.

The index is considered a strong measure of home prices because it examines price changes on the same property over time, instead of calculating a median price of homes sold during the month.

Home prices could fall another 10 per cent over the next 12 to 18 months before bottoming out, said Patrick Newport, an economist with financial consultancy Global Insight.

Newport said four of the largest groups currently trying to sell homes – banks holding foreclosed properties, home builders, speculators and unemployed consumers – are typically flexible about lowering house prices.

Sales of homes will probably start to rebound late in 2008, with price appreciation to follow, Newport said.

A second, broader Case-Shiller index, which measures 20 metropolitan areas, fell 6.1 per cent in October.

Among the 20 areas used in the broader index, 11 posted record year over year declines and all 20 declined in October compared with September.

Leading the index lower was Miami, where prices fell 12.4 per cent in October compared with the same month last year. Tampa was the next-worst-performing city with a year over year loss of 11.8 per cent.

Besides those two cities, Detroit, Las Vegas, Phoenix and San Diego also posted double-digit declines.

Atlanta and Dallas, where prices had previously risen, fell a little in October at 0.7 per cent and 0.1 per cent respectively.

Only three areas – Charlotte, N.C.; Portland, Ore.; and Seattle – posted year over year appreciation in October. Charlotte posted the largest gain at 4.3 per cent.

Among the three, only Charlotte is likely to avoid declining house prices within the coming few months, Newport said. The area has not had the periods of rapid appreciation other markets have experienced.

Kevin Johnson, co-founder of Homes of the South Inc. in Charlotte, agreed.

"We never jumped very high like other areas," Johnson said, so the city won't ``have a hard fall ... "

Bob Morgan, president of the Charlotte Chamber of Commerce, said the area's strong economy is also playing a role in supporting prices. Preliminary numbers show more than 14,000 jobs were created in the Charlotte area in 2007, he said, up from more than 12,000 in 2006.

The job growth is coming from a "pretty healthy" variety of sectors, including the financial industry, Morgan said. Charlotte is home to two of the country's four largest banks, Bank of America Corp. and Wachovia Corp.

Carole Brake, sales manager at Bissell Hayes Realtors SouthPark Office in Charlotte, said prices are still up despite an increase in inventory.

"Sellers are not in a mode to reduce their prices. They want a fair market price for their home," Brake said.

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Associated Press