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Must learnedly read, too; in part, of intellectual rigor
|Posted Wednesday, December 26, 2007|
|Home Prices Fall for 10th Straight Month|
By VIKAS BAJAJ
The decline in home prices accelerated and spread to more regions of the country in October, according to a series of private indexes released Wednesday.
Prices fell 6.1 percent from October 2006 in 20 large metropolitan areas, according to Standard & Poors/Case-Shiller indexes, compared with a 4.9 percent decline in September. All but three of the 20 regions saw real estate values fall, and even the three places Seattle, Portland, Ore., and Charlotte, N.C. where prices were up from a year ago saw prices fall from a month earlier.
The quickening decline in home prices could hurt the broader economy by leading to more foreclosures as homeowners have more difficulty refinancing mortgages and by sapping consumer spending as Americans feel less wealthy. But economists also noted that a faster descent from boom-era prices would allow the housing market to right itself sooner by removing vacant homes from the market.
Stocks fell modestly Wednesday in response to the latest home price data and on weaker than expected retail sales. The Standard & Poors 500-stock index was down 0.4 percent, or 5.32 points, to 1,491.12; the Dow Jones industrial average was down 36.09 points, or 0.3 percent, to 13,513.24.
The one disconcerting thing about the number is the rate that prices are falling is accelerating, said Patrick Newport, an economist at Global Insight, a research firm outside Boston.
The housing market will probably exert significant influence on the health of the broader economy in the coming year. In recent months, growth has slowed but strong exports and rising wages have offset some of the weakness in housing and the financial markets. Consumer spending in the holiday season has been weaker than some retailers had hoped, though reports indicate it is still growing.
It has been surprisingly resilient, Robert J. Shiller, the Yale economist and a creator of the home price indexes, said about the economy. He added that it was difficult to determine what impact the weakness in housing would have on the economy going forward. We are in uncharted territory, he said. This was the biggest housing boom we have ever seen.
By Mr. Shillers calculation, the decline in home prices is greater than at any time since 1941 when the housing market was faltering at the start of World War II. Since their peak in July 2006, home prices in the 20 regions have dropped 6.6 percent. Many economists are predicting that home prices will fall 10 percent to 15 percent from their peak to their trough, though some pessimists believe the drop could be as large as 30 percent.
Prices are dropping fastest in the Midwest, which has been hit hard by job losses in manufacturing, and in California, Florida and the Southwest, where the housing boom was at its frothiest. Prices have fallen the most in Miami (12.4 percent from a year ago), Tampa (11.8 percent) and Detroit (11.2 percent). Prices are also falling in the nations two largest metropolitan areas Los Angeles (8.8 percent) and New York (4.1 percent).
In Charlotte, Seattle and Portland, where the local economies are relatively healthier, prices were up from a year ago but lower than in September. It suggests to me that the psychological factor is very important, Mr. Shiller said. Even in cities that are doing well people see what is going on nationwide and they dont want to bid as much.
The Case-Shiller indexes, which Mr. Shiller created with Karl E. Case, an economics professor at Wellesley College, track same-home sales over time in an effort to remove the influence of the changing composition of homes sold from month to month. The government has a similar index based on mortgages bought by Fannie Mae and Freddie Mac that covers more of the country but does not track sales where home loans are greater than $417,000.
Copyright 2007 The New York Times Company. Reprinted from The New York Times, Business, of Wednesday, December 26, 2007.
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