Real es­tate’s de­scent: No re­lief seen from fore­clo­sures, fall­ing prices

The Washington Times Weekly - - National - BY DAVID M. DICK­SON

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, Zil­, 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 Econ­, 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.

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