First Quarter Housing Prices Fall at Record Pace, Buyers Still on Sidelines

By Mike Caggeso
Associate Editor
Money Morning

Home prices continued their two-year decline in March, with prices down 18.7% for the month compared to last year, and a record 19.1% decline for the first quarter compared with the first quarter last year.

All 20 metro areas measured by the S&P/Case-Shiller Home Price Index showed annual declines. Seventeen of them posted record monthly declines. Nine of them posted record annual declines.

"On a positive note, nine (metro areas) are reporting a relative improvement in year-over-year returns and nine of the 20 metro areas saw an improvement in their monthly returns compared to February. Furthermore, this is the second month since October 2007 where the 10- and 20-City Composites did not post a record annual decline," David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, said in a statement. "Based on the March data, however, we see no evidence that that a recovery in home prices has begun."

The combined 20-city index fell 2.2% in March from February. Minneapolis led all areas with a 6.1% monthly decline in March, its steepest monthly drop ever and nearly double its 3.2% decline from January to February.

Detroit and New York also reported record monthly declines of 4.9% and 2.5%, respectively. S&P says these cities represent of the extremes of the national housing boom and bust.

Since January 2000, home prices in New York are still up 73.4%. In that span, however, prices in Detroit are down 29.0%. In fact, Detroit home prices are back to their mid-1995 levels.

The biggest annual drops came in Phoenix (-36.0%), Las Vegas (-31.2%) and San Francisco (-30.1%). Denver, Dallas and Boston saw their home prices fall the least in the past year, -5.5%, -5.6% and -8.0%.

Economists blame the continued price declines on tighter lending standards, the glut of unsold homes and record foreclosures.

And many of those with enough money to buy a new or used house are staying on the sidelines waiting for prices to bottom and a clearer idea of an overall economic recovery.

"The housing market still has somewhat of a ways to go before it completely bottoms," Celia Chen, an economist at Moody's Corp. (NYSE: MCO), told Bloomberg. "Prices I think still will fall a little bit further."

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