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U.S. Home Values Now 32 Percent Below Their Peak

Steady declines continue across all metro regions

May 26, 2009

The company's latest report notes the U.S. National Home Price Index continues to set record declines, a trend that began in late 2007 and prevailed throughout 2008. The average home has now lost a third of its value since the market peaked three years ago.

The S&P/Case-Shiller U.S. National Home Price Index — which covers all nine U.S. census divisions — recorded a 19.1 percent decline in the 1st quarter of 2009 versus the 1st quarter of 2008, the largest decline in the series' 21-year history. The 10-City and 20-City Composites recorded annual declines of 18.6 and 18.7 percent, respectively. These are slight improvements from their returns reported for February.

"Declines in residential real estate continued at a steady pace into March," says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. "All 20 metro areas are still showing negative annual rates of change in average home prices with nine of the metro areas having record annual declines. Seventeen metro areas recorded a monthly decline in March, with Minneapolis, Detroit and New York posting record monthly declines."

On a more positive note, Blitzer said nine of MSAs are reporting a relative improvement in year-over-year returns and nine of the 20 metro areas saw an improvement in their monthly returns compared to February. It's also the second month since October 2007 where the 10- and 20-City Composites did not post a record annual decline. But that appears to be the extent of the good news.

"Based on the March data, however, we see no evidence that that a recovery in home prices has begun," Blitzer said.

As of March 2009, average home prices across the United States are at similar levels to what they were in the fourth quarter of 2002. From the peak in the second quarter of 2006, average home prices are down 32.2 percent.

Foreclosures continue to be the main force driving home prices lower. Earlier this month RealtyTrac reported foreclosure activity rose to a record level for a second straight month in April. According to the report, one in 374 U.S. households got a foreclosure notice, the highest monthly rate since the company began tracking such filings in 2005.

In terms of home values, Minneapolis had a record monthly decline of 6.1 percent in March. This represents the largest monthly decline of any metro area in the history of the indices. For March, Detroit and New York also reported their largest monthly declines, returning -4.9 percent and -2.5 percent, respectively.

The performances of these two MSAs represent the extremes of the national boom/bust scenario. The New York index is still up 73.4 percent from January 2000, though down 19.7 percent from its June 2006 peak. The Detroit index is 29.0 percent lower than in January 2000. Detroit home prices are back to their mid-1995 levels.

In terms of annual declines, the three worst performing MSAs continue to be the same three from the Sunbelt, each reporting negative returns in excess of 30 percent. Phoenix was down 36.0 percent, Las Vegas declined 31.2 percent and San Francisco fell 30.1 percent. Denver, Dallas and Boston continue to fare the best in terms of annual declines down 5.5 percent, 5.6 percent and 8.0 percent, respectively.

Looking at the data from peak-thru-March 2009, Dallas has suffered the least, down 11.1 percent from its peak in June 2007; while Phoenix is down 53.0 percent from its peak in June of 2006. All of the 20 metro areas are in double digit declines from their peaks, with ten of the MSAs posting declines of greater than 30 percent and two of those — Phoenix and Las Vegas — in excess of 50 percent.

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