Record Drop in Home Prices Feeds Pessimism on Economy
Housing prices in 20 U.S. cities fell 19 percent in January from a year ago
In the swiftest drop on record since a key housing index was launched in 2001, home prices in 20 American cities fell 19 percent in January 2009 from what they were one year before. Coming alongside a poll that underlines Americans' pessimism on the economy, the news points to the country's continuing struggle to climb out of the recession—and, analysts say, means that more job cuts are likely.
Most of the cities in the Standard & Poor's/Case-Shiller index—14 of the 20—had decreases in home prices of more than 10 percent, the report says. In some metropolitan areas, prices nearly halved. That includes Phoenix, the hardest-hit city, with a 35 percent drop, and Las Vegas, with a 32.5 percent drop. And none of the cities on the index had their housing prices rise or stay the same from the year before.
"There are very few bright spots that one can see in the data," the index committee's chairman, David Blitzer, said in a statement. That's particularly disappointing in the wake of a report last week that had seemed to give reason for optimism. It found that sales of new, one-family houses in February rose 4.7 percent above January's rate.
In other grim economic news, meanwhile, the Conference Board reported today that after hitting an all-time low in February, the consumer confidence index remained about the same in March. In both months, a little more than half of respondents called business conditions "bad," while about 7 percent said that they're "good."
Pessimism about the current state of affairs aside, many Americans actually think the country is on the right track, according to a new poll. Those optimists remain a minority, but their 42 percent share is the highest it has been in five years. And just last fall, as many as 90 percent thought the country was going in the wrong direction, compared with 57 percent now. The Washington Post/ABC News poll also found that respondents continue to give President Obama particularly high marks, with two thirds approving of how he's handling his position and 3 in 5 saying he's doing a good job on the economy.
That's partly because Americans seem to be blaming the financial system and banks' excesses more than the new administration for the country's economic woes. Even so, if Obama's programs to save the economy don't show some successes in turning the economy around, from his $787 billion stimulus package to his plan to restructure Chrysler and General Motors, he runs the risk of losing some of that political capital.
Read Obama: GM, Chrysler Must Restructure or Face Bankruptcy.
Reader Comments
home price slide
will continue until working class men and women ($10-$20 per hr) can afford payments which equal 35-40% of monthly income....we are looking at a long way to drop folks...two people making say $15.00 per hour dont qualify for a $300k mortgage, no matter what way you look at it...they qualify for about $150k....so 2 and 3 bedroom starter type homes accross the nation, should be 150k or lower...it doesnt matter if you live in des moines, iowa,,,or califonia.....everything priced above 300K is EXCESS./..///demolish it and build two homes for 150k each.
Foreclosure Fest Started the Pins Falling
The banks and mortgage companies who bundled their home loans into mortgage securities then proceeded to foreclose on homes when the adjustable rates suddenly doubled homeowners' monthly payments caused their own downfall as investors lost confidence in the stock market when the resultant housing bubble burst. Freddie MAC, Fanny MAE and AIG got stuck with the sub-prime loan guarantees and banks gave them much of their toxic assets -but still had bundles on their books. Depositors lost confidence in the banks and the initial run on some large banks like WAMU wiped out their reserves and operating capital. What these banks should have done was to renegotiate with borrowers because getting the initial loan payment rates was better than getting nothing. Of course they shouldn't have been making sub-prime loans to begin with - but the Federal Reserve had flooded lenders with cheap money, so who could resist making as many loans as possible for commissions and points? As the price of houses inflated, so did loan agents' commissions and lender points. The home value plunge actually puts things more back in line with what would have been had not the artificial housing bubble been created in the first place. The people who got wiped out were those who would otherwise not have qualified for home loans based on prudent lending policies and the greedy bankers who went for points and commissions rather than to protect their institutions from bankruptcy because they depended on Fannie, Freddy and AIG to bail them out. And they were right - when that wasn't enough, the federal government stepped in with future tax dollars to bail them out - and they still kept their commissions and points earned during the heydays. When consumers lost confidence, the whole house of cards fell, and along with Humpty Dumpty - all the kings men and all the kings horses are having a difficult time gluing him back together again. Unfortunately, it's the economy that got shut down with the lost of confidence.
This is AS I SEE IT, by Mike "Mainer Mike" Brown.
I'm not denying that falling housing prices is bad for many. But for some of us, it's a welcome relief.
My grandmother's next door neighbors house, in 2004, sold for over six hundred thousand dollars, and while it was sort of a nice place, it wasn't that special. Average, everyday Joes making a modest income like myself can't afford that.
Even buying a cheap trailor isn't so inexpensive. During the turn of the millenium, I could've purchased a decent trailor on a small piece of property in my home state of Maine for twenty five to thirty thousand dollars.
Now in 2009, myself buying mobile home like that, forget it! I can't afford the now higher prices trailors go for.
So I'm hoping that the prices of houses and trailors become more and more reasonable, because I deserve the chance to be a home-owner.
advertisement
