The Case/Shiller US home price index hit record lows today as prices dropped 12.7% in February versus a year ago. This was the biggest drop in prices in the history of the current index which dates back to 2001.
The older Case/Shiller 10 city report showed a 13.7% drop in prices which was the the largest drop since the report was introduced in 1987.
Prices have now fallen every month since January of 2007. That's 14 consecutive months! There were zero indications that we are near a bottom. I watched some commentary on CNBC about the results of the report, and even bubble TV failed to find one positve in the report. Here are the the results from Bloomberg:
"April 29 (Bloomberg) -- Home prices in 20 U.S. metropolitan areas fell in February by the most on record, pointing to an imbalance between supply and demand that shows no sign of ending.
The S&P/Case-Shiller home-price index dropped 12.7 percent from a year earlier, more than forecast and the most since the figures were first published in 2001. The gauge has fallen every month since January 2007.
``This is just one more strain for consumers, in addition to high energy prices and tight credit,'' said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, which forecast a price decline of 12.4 percent. ``Prices are going to continue to fall, probably through the end of next year.''
Nineteen of the 20 cities in the index showed a year-over- year decrease in prices for February, led by a 23 percent slump in Las Vegas and a 22 percent decline in Miami. Charlotte was the only area showing a gain with a 1.5 percent increase. "
Well I guess if you need to buy a house then you better move to Charlotte. These numbers are obviously hideous and there seems to be no end in sight. The numbers from Vegas and Miami are stunning. We are now seeing price drops that are worse then the 1990 housing slump according to the 10 city report which hit an all time low.
Imagine buying a home for $500,000 in Las Vegas last year, and learning that your house is now worth $100,000+ less. The impact of this realization will result in a major pullback in consumer spending habits.
When people feel less wealthy they spend less. If I was $100,000 in the hole living in Vegas I wouldn't want to spend a dime above what I had to.
People will be walking away in record numbers as housing prices continue to plummet. All of this talk about the government stepping in and stabilizing the housing market is nothing but lip service.
When I asked one of the Wall St. players in the real estate market about government intervention, he responded to me by asking a question. Jeff, Why would the government step in and try to stabilize prices at a level where no one can afford them?
Quite a good question don't you think? Expect housing prices to get slaughtered before the government comes in with any sort of substantial bailout. Sweden waited until housing prices dropped 50% before their government intervened to stabilize their housing bubble.
The bailout will eventually happen, but it will be after housing prices have corrected to affordable levels.