The 20-city S&P Case-Shiller index has posted losses for a staggering 27 months in a row. In October, 14 of the 20 cities set fresh price decline records.
"The bear market continues; home prices are back to their March 2004 levels," says David Blitzer, Chairman of the Index Committee at Standard & Poor's.
Sunbelt cities suffered the most, but most of the country is watching home values fall. Home prices in Phoenix, Las Vegas and San Francisco all fell more than 30% on a year-over-year basis. Miami, Los Angeles and San Diego recorded year-over-year declines of 29%, 28% and 27%, respectively.
"As of October 2008, the 20-City Composite is down 23.4%," said Blitzer. "In October, we also saw three new markets enter the 'double-digit' club."
Atlanta, Seattle and Portland each reported annual rates of decline of about 10%.
"While not yet experiencing as severe a contraction as in the Sunbelt, it seems the Pacific Northwest and Mid-Atlantic South is not immune to the overall demise in the housing market," Blitzer added.
Deteriorating environmentMany of the factors affecting home prices turned strongly negative this fall, according to Blitzer.
"October was really the first month to feel the full brunt of the credit crunch," he said. "Up until the Lehman Brothers [bankruptcy filing on September 15], everyone felt relatively optimistic."
Plus, in many of the free-falling cities the majority of real estate sales consist of distressed properties such as foreclosed homes and short sales. These houses tend to sell at a steep discount to the rest of the market, and when they account for a large proportion of all sales, they can exaggerate the depth of price declines.
Of course, foreclosures continue to be a big problem as well. In October alone, nearly 85,000 people lost their homes to foreclosure, adding vacant inventory to an already overburdened market.
Home sellers should not expect prices to improve any time soon, according to Pat Newport, a real estate analyst for IHS Global Insight.
"I expect it's going to get quite a bit worse over the next couple of months," he said. "Existing home sales reports have really been bad."
Home sales fell 8.6% in November, much more than expected, to an annualized rate of 4.49 million units according to the National Association of Realtors.
And although interest rates are currently extremely low- the 30-year fixed-rate averaged 5.14% during the week of December 24, according to mortgage giant Freddie Mac (FRE, Fortune 500) -that's doing more to help people refinancing existing mortgages than it is to help new home buyers.
"Buyers still have to have a 20% down payment," said Newport, "and, in this environment, it can be hard to meet that criteria."
The latest Case-Shiller numbers provide more ammunition to Washington policy makers who want to do more to fix the housing mess, according to Jaret Seiberg, an analyst with the Stanford Group, the policy research firm.
"These data just add to the tremendous pressure on the president-elect and the Democrats to stimulate housing," he said. "That means more lucrative tax incentives and broad foreclosure prevention. All of this will likely be in the stimulus plan that Congress adopts in January."
Nicholas Retsinas, Director of Harvard University's Joint Center for Housing Studies, agrees. "Housing problems are at the core of our economic problems," he said, "yet, of the government interventions made during 2008, few were focused on housing."
With a new administration and Congress in place next month, he expects to see a renewed interest in stabilizing the housing market.
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