Housing Market Continues To Plunge

The housing market continues to be in freefall.

The S&P/Case-Shiller Index plunged 15.8 percent in May, the biggest decline since records began being kept in 2001. All 20 Metropolitan Statistical Areas (MSAs) measured by the index fell. Nine of the MSAs are showing record lows and 10 had double-digit declines.

“Regional patterns stand out: the Sunbelt led by Miami, Tampa, Phoenix, Las Vegas, San Diego and Los Angeles saw the biggest booms and now see the largest declines,” said David M. Blitzer, chairman of the Index Committee at Standard & Poors. “The Northeast, including Boston and New York, is cyclical but less volatile while the Midwest, paced by Detroit and Cleveland face difficult local economies.”

Part of the problem is that there remains a huge supply of existing homes for sale. Builders are being forced to put up “spec homes” in an effort to lure reluctant consumers to their development. One possible bright side to the real estate glut — if you want to call it that — is high gas prices. Many people are moving closer to their jobs because they can no longer afford the costs to keep their gas tanks filled.

But that trend is not going to be enough to turn around the housing market. Bank of America Chief Economist Mickey Levy told Bloomberg Television that he expects housing prices to continue to decline.
“The decline in home prices, while necessary to clear the inventories, is building in expectations of more house-price declines, which is keeping potential buyers on the sidelines,” he said.

Experts say the housing market has to hit bottom though they don’t seem to be sure when that will happen. One thing is for sure: the bad times are nowhere near over.

Jonathan Berr