Tuesday, July 29, 2008

Still Falling

House prices are still falling. Equity is disappearing. More people are underwater. And people are still worried. This article from the New York Times titled Home Prices Fall in May; Consumer Confidence is Flat. reviews two reports that show us where we are today. First the is the Case-Shiller index for home prices in May. Let's take a look -

Prices were down 15.8 percent from May 2007, including a 0.9 percent one-month drop in May alone. The 10-city price index, which dates to 1988, dropped 16.9 percent, its sharpest decline on record.

All 20 cities measured by the index showed annual declines in home values, and 10 cities have suffered double-digit percentage declines in the last year. Miami and Las Vegas have fared the worst, with prices in each city dropping more than 28 percent since May 2007.

There were some signs that the decline has started to abate. Prices in seven regions, including Boston, Dallas and Charlotte, improved in May, some for the second straight month. Boston, for example, was up 1.05 percent in May, though values are still 6.2 percent below where they were a year prior.

The report “does seem to suggest the rate of decline of existing home prices is slowing,” Ian Shepherdson of High Frequency Economics wrote in a note. “To be sure, prices are still falling very rapidly, and there is no prospect of any rebound this year and probably next, but a slower rate of fall is welcome nonetheless.”

Huge declines in some areas of the country sounds like it should be devastating. So the good news, not sure that is an accurate description but certainly not bad news, is that the consumer confidence did not decline with the house prices. Rather it remained the same.

The [Confidence Board, a private research] group’s consumer confidence index rose to 51.9 from 51 in June, and a measure of expectations about the economy’s prospects rose to 43 from 41.4. Those figures are historically very low.

The numbers are low but did not decline further. Rather there was a bit of an uptick. Not great but much better than it could be, especially after the Case-Shiller report.

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