Home Prices See Worst Decline Ever Recorded by the S&P’s Case Schiller Index
Posted by Hojin on August 28, 2007
Home prices fell 3.2% in the second quarter of 2007 when compared to the same period in 2006. 15 out of the 20 cities tracked by Case Schiller saw declines. This decline for the nation is the largest ever recorded by the Case Schiller index in its 20 year history.For us in Central Florida, Tampa saw the second worst decline at 7.7% meaning we’re basically the worst market in the nation. Yikes! Another way to look at this situation is that it is a great time to buy at the bottom of the market. You can’t ever figure out the exact bottom but we’ve gotta be getting close.
What is more worrisome is that these figures ended in July before we really started hearing about the sub prime crisis with consumers. My guess it that the numbers will be even worse for this reason in Q3 and we’ll end up at levels similar to the real estate market following the savings & loan crisis in the early 90’s. Here is the link to the full report from Standard & Poor’s Case Schiller index.
NY Times online published an article by Robert Shiller entitled “A Time for Bold Thinking on Housing” that’s one of the best assessments of the current housing market.
alex said
Why would it be close to the bottom? The Case-Schiller stuff shows prices still at 10 year highs despite the 4% drop of late. The Japanese housing bubble deflation has been going on almost 20 years, but I am sure our problem is not as bad. I just don’t see how it is that much better.
Sean Johnson said
Home prices are not near the bottom in Central Florida. My grandfather bought and rented real estate in the 60s-80s.
His rule of thumb was that he could rent out property for 1% of its value per month (i.e. a 100k home rented for 1k per month). This held true and he was able to rent out property in that price range for 30 years.
Home prices are so far out of wack no, that people who bought 250k homes (would-be flippers who found themselves with no choice but to be landlords) a few years ago are lucky to rent them out for 1k per month – this barely covers mortgage interest, taxes, and insurance with barely anything being added to the mortgage principle.
Home price v. rental price is where you will find the bottom. When rental price nears the said 1% mark is when we will reach the bottom of housing.