Real estate’s descent: No relief seen from foreclosures, falling prices
Home prices across the nation were 18.2 percent lower on average in the fourth quarter of 2008, compared with year-earlier levels, as foreclosure rates jumped to record highs last year.
The price decline during 2008 was by far the biggest drop since the Standard & Poor’s/CaseShiller national home price index was first published 21 years ago. Separately, Zillow.com, a Web site that tracks real estate prices, estimated recently that the collective plunge in U.S. home values last year totaled $3.3 trillion.
And there appears to be little relief in sight, both for home prices and foreclosures, experts said.
“With the number of homes for sale at an all-time high, housing prices will continue declining for quite a while, and quite a bit more,” said Patrick Newport, U.S. economist at IHS Global Insight. “Indeed, just as house prices overshot on the way up, they are likely to undershoot on the way down because of the inventory overhang.”
The average national home price soared 90 percent from early 2000 to its peak during the spring of 2006. It has now plunged 26.7 percent, having fallen to 2003 levels.
“There are very few, if any, pockets of turnaround that one can see in the data,” said David Blitzer, chairman of the index committee at Standard & Poor’s. “Most of the nation appears to remain on a downward path.”
In an effort to stabilize home prices by stemming foreclosures, President Obama unveiled a $275 billion housing plan two weeks ago. The policy encourages lenders to modify mortgages and allows other homeowners to refinance.
The administration estimated its plan would help 9 million households. But Mark Zandi, chief economist at Moody’s Economy.com, projected that foreclosures would still reach 3.1 million in 2009, well above last year’s record level of 2.7 million.
RealtyTrac, which collects foreclosure data, recently reported that foreclosure activity in January was 18 percent higher than in January 2008.
“We feel extremely sorry for the people who have to go through the [foreclosure] process,” said Thomas R. Kunz, president and chief executive officer of Century 21 Real Estate. He attributed much of the downward pressure on prices to the huge inventory of homes for sale, many of which are foreclosed properties.
“But foreclosure is not something new to our business,” Mr. Kunz said in a Feb. 23 meeting with editors and reporters of The Washington Times. “It’s a little more accentuated now than in a normal market,” he acknowledged, “but the issue is that we’ve got to move the inventory.”
Due to soaring foreclosures in 2007 and 2008, the 67.5 percent homeownership rate for last year’s fourth quarter was the same as it was at the end of 2000, the U.S. Census Bureau reported in January.
No major metropolitan region seemed immune from falling home prices last year.
S&P/Case-Shiller publishes home price indexes for 20 metropolitan areas. Prices fell last year in all 20. In eight, the plunge was 20 percent or more, including a 34 percent collapse in Phoenix, a 33 percent retreat in Las Vegas and a 31.2 percent drop in San Francisco. The Denver and Dallas regions saw their home prices dip the least last year — about 4 percent.
Home prices in the Washington metropolitan region fell 19.2 percent last year. Since D.C.-area prices peaked in May 2006, they have fallen 29.8 percent.
Americans haven’t just seen their homes shrink in value. Their 401(k) retirement accounts have been evaporating as well. The S&P 500 stock index has plummeted by more than 50 percent from its record high in October 2007 to levels last seen in 1997. Meanwhile, the economy has shed more than 3.5 million jobs since it entered recession in December 2007. As a result, consumer confidence reached a record low in February, the Conference Board reported February 24.
“In the real estate sector, one of the biggest issues is consumer confidence,” Mr. Kunz said. With consumer confidence at rock bottom, Century 21 will try to drum up business this spring by holding a sweepstakes whose grand prize will be $221,000.