Housing Slump Continues — But the Momentum is Slowing

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September housing prices, as measured by the S&P/Case-Shiller Housing Index, are out, and they’re down 3.6% year-over-year. This continues a trend that we’ve seen since the summer: Housing prices continue to fall, but more slowly than before. (The prior month, they had fallen at a 3.8% year-over-year rate.) While the continuing deceleration is good news, it’s a trend that doesn’t portend a recovery in 2012. More likely it’ll be 2013.

Of course, some cities are already in recovery. Detroit was down a smidge (0.5%) from August, but year-over-year up 3.7%. This is the third straight month in which Detroit has showed a positive year-over-year change, a fact that weighs heavily in market analysis since month-to-month numbers are subject to more variation. Washington, D.C., which I cited as another bright spot a month ago, is up 1% on both a month-over-month and year-over-year basis.

But that’s about all the good news there is. Bad news is plentiful in many regions, with Atlanta, Las Vegas, and Phoenix touching new lows. Atlanta took the worst pounding of any metro in the 20-city index, registering dips of 5.9% from the prior month and 9.8% from the year before. Vegas, for its part, is down 7.3% year-over-year, making the blackjack table perhaps a safer bet than area single-family housing. Home prices in Phoenix, according to S&P, are down to nearly the levels of January 2000.

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With market data like this, it would be surprising if home buyers did anything other than sit on the sidelines until spring, traditionally the biggest season for home sales. We’ll get a little confirmation of that Wednesday, when the National Association of Realtors releases Pending Home Sales, a leading indicator that tracks signed contracts. I fully expect that number to dip, though.

Foreclosures are also a storm cloud on the horizon. Since real estate is local, the “foreclosure crisis” doesn’t affect every market equally. But for states with large numbers of foreclosures, such as Arizona and Nevada, buyers may be waiting to see if large jolts of inventory keep hitting the market — leading to continually depressed prices.

On that note, let’s take a look at Florida, one of the states leading the nation in foreclosures and a place where homebuyers might conceivably try to stay on the sidelines for a while. There are two Miami areas covered by Case-Shiller, Miami and Tampa. The drop in prices in Miami continues to slow, with this month’s 4.0% year-over-year decline looking slightly better than last month’s 4.6% year-over-year decline. But in Tampa, things are looking worse, with the drop in prices accelerating — from down 6.0% year-over-year in August to down 6.7% year-over-year this month.

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Any number of factors, such as a pop in regional employment, could reverse these trends pretty quickly, but I’m not sure that an election year is the time to look for them. If you’re a home shopper and you see something you like, it may make sense for you to buy at today’s near-record low interest rates. But be prepared to stay in your new home for the foreseeable future, because selling a house isn’t likely to get easier for a while.