Plunge In US Home Prices Sets Another Record

It is another new month and another new record.

US home prices according to the Case-Shiller Index continue to free fall.

Of course, that is not exactly news these days but here’s the skinny on the new figures nonetheless.

From Reuters by Julie Haviv entitled: US home prices plunge record 17.4% in Sept-S&P

“Prices of U.S. single-family homes plunged a record 17.4 percent in September from a year earlier, according to a key S&P index released on Tuesday.

The composite index of 20 metropolitan areas fell 1.8 percent in September from August, according to the Standard & Poor’s/Case-Shiller Home Price Indices, and a co-developer of the index said rising unemployment makes the outlook for the hard-hit U.S. housing market even bleaker.

S&P said in a statement that its composite index of 10 metropolitan areas declined 1.9 percent in September from August for an 18.6 percent year-over-year drop, also a record.

Declines in home prices in most areas were greater in September than in August, S&P said.

“This is a pretty gloomy report,” Karl Case, co-developer of the index and a professor of economics at Wellesley College, said on a conference call following the release of the report.

And because the Standard and Poor’s S&P/Case-Shiller Home Price Indices has not yet accounted for several important factors that have worsened in recent months, led by unemployment, the outlook is darkening further.

“Unemployment is rising rapidly, a primary factor that causes foreclosures to rise and home prices to decline,” Case said.

“Plus, some people cannot even get a loan due to the credit crunch, so there are a lot of factors out there that have not even hit these home price numbers yet,” he said.

The U.S. housing market is currently suffering the worst downturn since the Great Depression. A huge supply of unsold homes, tighter lending standards and record foreclosures have pushed down home prices, deflating a bubble from the early part of this decade.

The U.S. economy is considered to be either in or on the brink of a recession, and most economists and experts contend that an end to the downward spiral in housing prices is crucial to any recovery.

“House price declines have been at the root of the financial crisis and it appears, as of September, that this decline continued unabated,” said Lawrence J. White, professor of economics at New York University’s Stern School of Business.

“Until we have some kind of stabilization in the house price sector, we will continue to see problems in the financial sector,” he said.

“House prices will probably drop another 10 percent, but I am hopeful that a bottom will be reached in the late spring of 2009,” he said.”

By the way, to put it all in perspective here’s a great chart from the Calculated Risk blog.

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