Commentary

Housing Prices Still Spiraling Down

Here is a visual of housing prices as updated from this weeks Case-Shiller numbers. The data through March of this year is not looking good. A number of economists and journalists have been calling this a double dip in housing prices, and you’ll note that there are several cities that saw prices start to tick up around March 2009 only to come back down. But really, the temporary stabilization in housing prices in 2009 was only due to demand stolen from the future by federal support programs, it was all housing market fauxcovery.

The unfortunate aspect of this story is that we need these price to keep falling for a few reasons: one, lower prices will mean more demand from buyers and a fast pace of home purchases to start clearing out the massive housing inventory in America; two, if prices need to fall a bit more to get back to the historical housing price trend in housing.

Housing prices june 2011
Source: S&P/Case-Shiller

There is a lot in this chart, and it might be difficult to make out everything, but nearly every city has either been on the decline since 2006 or, after a short uptick in 2009, has returned to a downturn. In March, the twin cities saw the sharpest continued drop, as prices in the Minneapolis area fell 3.7%. Only Washington DC has seen a steady increase since 2009, rising 1.1% for March. Seattle also saw a 0.1% increase in prices in March.

The WSJ has a few more details on the story:

U.S. home prices fell 4.2% in the first quarter of 2011, hitting a new post-bubble low and sending the battered housing sector into a double dip, according to the S&P/Case-Shiller home-price index released Tuesday. Twelve of the 20 metropolitan areas tracked in the index posted new lows in March, and prices nationally have fallen 5.1% in the last year, pushing them back to 2002 levels. “This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation,” said David M. Blitzer, chairman of the S&P Index Committee. “Home prices continue on their downward spiral with no relief in sight.”

Separately, the mood among U.S. consumers fell steeply in May, dragged down by more pessimism about job prospects and future incomes, according to a report released Tuesday. The Case-Shiller index of 10 major metropolitan areas fell 0.6% and the 20-city index was down 0.8% in March from February. Compared with a year earlier, unadjusted March prices fell 2.9% for the 10 major markets while the 20-city index dropped 3.6%.

See the whole article here.

Anthony Randazzo

Anthony Randazzo is director of economic research for Reason Foundation, a nonprofit think tank advancing free minds and free markets. His research portfolio is regularly evolving, and he maintains a wide interest in economic policy at both a domestic and international level.

Randazzo is also managing director of the Pension Integrity Project, which provides technical assistance to public sector retirement system stakeholders who are seeking to prevent pension plan insolvency. His research focus on the national public sector pension crisis has a dual focus of identifying the systemic factors that cause public officials to underfund pension obligations as well as studying the processes by which meaningful pension reform can be accomplished. Within the Project he leads the analytics team that develops independent, third party actuarial analysis to stakeholders considering changes to public sector retirement systems.

In addition, Randazzo writes about the moral foundations of economic theory, and is currently developing research on the ways that the moral intuitions of economists influence their substantive findings on topics like income inequality, immigration, or labor policy.

Randazzo's work has been featured in The Wall Street Journal, Forbes, Barron's, Bloomberg View, The Washington Times, The Detroit News, Chicago Sun-Times, Orange-County Register, RealClearMarkets, Reason magazine and various other online and print publications.

During his tenure at Reason he has published substantive research on housing finance, financial services regulation, and various other aspects of economic policy at the federal level. And he has written regularly on labor economics, tax policy, privatization, and Turkish-U.S. political and economic issues.

Randazzo has also testified before numerous state and local legislative bodies on pension policy matters, as well as before the House Financial Services Committee on topics related to housing policy and government-sponsored enterprises.

He holds a multidisciplinary M.A. in behavioral political economy from New York University.

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