No End in Sight to Housing Slide

The flurry of housing data released today all point to the same conclusion: We have not yet hit bottom. Prices and new home sales continued to fall relative to last year.

On the price side, both the Office of Federal Housing Enterprise Oversight and Standard & Poor’s/Case-Shiller reported record annual declines, with the OFHEO purchase-only index down 4.8 percent over the second quarter of last year and Case-Shiller reporting a 15.4 percent decline on a national basis. Case-Shiller’s index for the top 20 metropolitan areas has now posted 31 consecutive months of declining growth, with June’s 15.9 percent record annual decline capping 18 consecutive months of price declines. Of the 20 metropolitan areas tracked, half have seen double-digit annual declines, and seven markets have lost more than 20 percent. It should be noted that nine markets showed slight monthly increases, although all markets are down on an annual basis.

OFHEO tracks price changes for 382 metropolitan areas in the country. Their data show annual declines in 157 metropolitan areas; but when the areas are weighted by the number of owner-occupied houses, 56 percent of homeowners live in places with reported annual losses. The numbers are far worse when price levels are adjusted for inflation (based on the CPI excluding shelter). Only 10 metro areas saw house prices rise faster than inflation. Put another way, 99.3 percent of homeowners live in metro areas with declining property values.

New home sales data is also bleak, with the Census reporting a 35.3 percent decline in new home sales compared with last July. The July numbers were up a reported 2.4 percent over June, but that increase was not statistically significant. While the inventory of unsold new homes is down to 10.1 months from a March peak of 11.2 months, new homes that have been completed but were unsold at the time of completion are sitting longer. Construction was finished on the median unsold completed home 8.5 months ago, a figure that has been steadily increasing since last August and is nearly double the 2006 average. Only 18,000 completed homes were sold last month, the lowest number at any point in the past year.

The backlog of unsold new homes also puts downward pressure on future construction activity, as homebuilders seek to work through the backlog of unsold homes before they ramp up new activity. This is reflected in the weak permit numbers that show overall permitting at the lowest level since April 1991 and single family permits at the lowest level since August 1982.

To read CAP’s legislative proposals and policy analysis on the housing crisis, please go to the Housing page of our website.