Home Prices Fall Record Rate in 2007

By Mike Caggeso
Associate Editor

An oversupply of homes, sharp rise in foreclosures, and stricter credit regulations caused home prices to fall 8.9% in 2007, the largest ever year-over-year decline in the S&P/Case-Shiller U.S. National Home Price Index.

Some metropolitan areas were whacked with double-digit devaluations. Home prices fell 17.5% in Miami, 15.3% in Las Vegas and Phoenix, 15% in San Diego, 13.7% in Los Angeles, 13.6% in Detroit, 13.3% in Tampa Bay and 10.8% in San Francisco. Worse, those were some of the hottest markets in 2006. 

Only three metropolitan areas saw prices increase for the year: Charlotte [2.3%], Portland [1.2%] and Seattle [0.5%].

"Wherever you look, things look bleak, with 17 of the 20 metro areas reporting annual declines and the remaining three reporting flat or moderate growth rates," Robert Shiller, chief economist at MacroMarkets LLC and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, said in the statement.

The most striking statistic of the index is fourth-quarter declines. Prices in the fourth quarter decline 5.4%, following respective declines of 1.0%, 1.0% and 1.8% in the first, second and third quarters last year. 

Foreclosures up 57% in January... a good thing?

While Shiller and Co. didn't give any predictions for first-quarter 2008, homeowners shouldn't expect a drastic turnaround after last quarter's massive declines.

However, a study by online foreclosure marketer, RealtyTrac shows the number of foreclosure filings in January signals that efforts by lenders and state and federal government are taking effect, said James Saccacio, RealtyTrac's chief executive.

Foreclosure filings increased by 57% in January over the same month last year, and by 8% more than December 2007. In all, 233,001 were affected. Of that, 45,327 were repossessed. 

"January's foreclosure numbers demonstrate that foreclosure activity is continuing on its upward trend, substantially increasing from a year ago in many states," Saccacio said in a statement. "However, the 8% monthly increase in January is not as precipitous as the 19% spike we saw in January of 2007, and several key states actually experienced decreasing foreclosure activity from the previous month."

"It could be that some of the efforts on the part of lenders and the government - both at the state and federal level - are beginning to take effect," Saccacio added. "The big question is whether those efforts are truly helping homeowners avoid foreclosure in the long term or if they are just temporarily forestalling the inevitable for many beleaguered borrowers."

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