Home prices in 20 major U.S. cities dropped 1.8% in September compared to August according to the Case-Shiller Index released on Tuesday. The index reporters say prices fell a record 17.4% on in September compared with September 2007. The index covers 20 major metropolitan areas in the country and applies only to re-sales, not new homes. Here's the story on MarketWatch.com.
Monday, the National Association of Realtors® gave its report for October, but the Case-Shiller Index always runs two months behind, so Tuesday’s news related to September sales. Still, Case-Shiller is widely followed in the financial markets because it reports sales after certain adjustments instead of just raw sales data. The Case-Shiller methodology excludes homes that have had improvements in an attempt to account for the fact that the new buyer is purchasing a home that is really different from the home that the seller purchased. By this exclusion, however, the index eliminates the relatively attractive homes and limits its measurement to what we in real life call "outdated homes." Furthermore, it would eliminate so many homes in smaller markets that it would have results that are statistically insignificant. Therefore, it sticks to the larger markets.
Today, the U.S. Commerce Department reported that in October sales of new homes dropped to their lowest level since 1991. But no one knows for sure. As MarketWatch.com reported, “government statisticians have low confidence in the monthly report, which is subject to large revisions and sampling and other statistical errors. In most months, the government isn't sure whether sales rose or fell.”
What is clear is that the home sales market – new homes and re-sales – has low volume and dropping prices. What is not clear is how long this downward shift will continue. Today's news tells us that inventory levels continue to drop for new homes and that is the necessary precursor to rising prices and the resumption of new construction. Nationally, inventory levels for re-sale homes held steady and dropped in some markets – not yet in Flagstaff.
There is little to give thanks for in the housing reports this week, except, perhaps that you still have a roof over your head. For those facing foreclosure, today is the day when you can breathe a sign of relief because Fannie Mae, Freddie Mac and the banks that are following their lead, suspend foreclosure actions until January 9. For all of us with homes, tuck in and be thankful for what we do have. It’s more than these folks had:
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