Home Prices in U.S. Fell Record 4.5% in Third Quarter

Source: Bloomberg News

Nov. 27 (Bloomberg) -- Home prices in the U.S. fell in the third quarter by the most in at least two decades as the subprime lending crisis caused sales to slump.

Home values retreated 4.5 percent in the three months through September from the same period a year before, the most since records began in 1988, according to a report today by S&P/Case-Shiller. It followed a 3.3 percent drop in the second quarter.

Prices will probably keep sliding as foreclosures force more properties on to the market and sales weaken as mortgages become harder to get. The slump threatens to slow consumer spending as fewer homeowners will be able to afford vacations, new autos or home improvement projects.

``We see this as just the beginning of a downward trend,'' said Michelle Meyer, economist at Lehman Brothers Holdings Inc. in New York, who correctly forecast the quarterly decline. ``Weaker home prices imply a weaker consumer.''



Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=acGASBwZyEYs&refer=home

When do declining real estate prices meet the collapsing dollar?

"Prices will probably keep sliding as foreclosures force more properties on to the market and sales weaken as mortgages become harder to get. The slump threatens to slow consumer spending as fewer homeowners will be able to afford vacations, new autos or home improvement projects."


In an economy based on consumer spending, what does that translate to: Disaster.

it's the basics: food, shelter, utilities.

basically loaning people more money than they could ever hope to repay.

meaning some place took a 20% hit while others got alot less burned

Another impact of falling home prices that we often don't think of.

snip...

The housing recession will drive down property values by $1.2 trillion next year and slash tax revenue by more than $6.6 billion, according to a report issued today by the U.S. Conference of Mayors. The 361 largest U.S. cities will experience a combined loss of $166 billion in economic growth, led by $10.4 billion in the New York-Northern New Jersey area, according to the study.

In Prince William County, VA a lot of the things they wanted to do after they passed that illegal immigration bill they will not be able to afford because the housing market has collapsed in this county and there won't be enough tax revenue.

Karma, huh!

and I am speaking as a homeowner. Too many people have not been able to afford a house and prices needed to fall.

The fall in house prices does not bother me; if I need to move then I will get less money when I sell, but my new home will also cost less. The people who are most affected are (1) flippers, (2) people who have borrowed up to the hilt (or should I say "tapped their equity") in order to keep up with the big-screen TVs and SUV's next door, so are now in a "negative equity" situation, and (3) people who are going to sell up, downsize, and maybe retire. The first of these two groups I have no sympathy for; the third group I do, but most of these folks have probably owned their properties long enough that they still have large profits.

But if you mortgage on the house is 500,000 and it is now worth 450,000 your losing a ton of money.

If the home was worth the payment you are making TO YOU when you bought it, it probably still is. If it wasn't, then you're an idiot (generic "you" by the way). And as a poster above says, if you are selling now, then your replacement will likely be lower in price too. The people who are hurt most here are ARM holders who bought above their ability to afford and people who try to make a quick buck selling homes for investments. Yes predatory lenders exist, but any con must also have a willing victim. I was pushed many times to take an ARM (I move frequently) in teh lats few years. I said no thanks every time - the savings were very minor and who bets on lower interest rates (essentially the only economically valid reason to choose an ARM) at a time of hostorically low fixed rates? If interest rates get back up to 18% or so THEN sell me an ARM! Of course I am sympathetic to those who do not understand finance, but some poor decisions were doubtless made - even if that was just not spending a couple hundred bucks on a professional opinion.

It's going to be a bumpy ride.

I'm no prophet but it doesn't take one to see we're heading into steaming mountain of dung - economically speaking.

Welcome back from your cave, Michelle. Or should I say your 3BR 1800 sq ft on Park Avenue?

nicely.

Can this news be classified as a surge?

One was a flip and it was quite profitable. The other was a duplex I held for just over a year and sold for 25% more than I bought it for.

I think only the outrageously over priced "hot" markets will have major devaluations but it doesn't seem to be the case from my personal experience.

Just sayin'...