Home Prices Drop by 16% in July

3 October 2008

Author: admin Posted under Foreclosure Crisis

Last Tuesday, the housing index as monitored by Standard &Poor’s/Case-Shiller showed a significant drop in home prices for the month of July as compared to the same period last year. The 16.3 percent decline is believed to be the biggest drop since the index was created in 2000.

In addition, the 10-city index also dropped by 17.5 percent, the largest decline recorded in 21 years of its existence. On the other hand, the 20-city index is in a much worse shape, plummeting by 20 percent from its peak in July 2006.

Based on the index, there has been no observable home price gain in any city for the said month. This is actually the scenario in the last four months.

The only silver lining, in this otherwise terrible news, is that there is a somewhat slowing down in the pace of the declines. And yet, it is still not clear whether the market will bottom out any time soon.

Home prices in Las Vegas plunged the most followed by Phoenix and Miami. For most of the cities belonging to the Sunbelt area, home prices fell between 20 and 30 percent compared to last year.

Surprisingly, the cities of Denver, Boston, Minneapolis and Dallas all showed flat or positive gains in the last three months.

The decline in home prices can be attributed to the growing inventory of foreclosure homes in the market. To add salt to the injury, the tightened lending guidelines have recently made it nearly impossible for interested buyers to get approved for mortgages. For this reason, home sales activity in most cities remains to be sluggish.

Aside from this, the collapse of investment giants in Wall Street has created an atmosphere of fear among potential buyers. With the nation’s economy on the brink of a recession, it is not surprising that the real estate market is greatly affected.