S&P: US home prices tumble a record 14.1 pct in 1Q

AP

NEW YORK - U.S. home prices dropped at the sharpest rate in two decades during the first quarter, a closely watched index showed Tuesday, a somber indication that the housing slump continues to deepen.

Standard & Poor's/Case-Shiller said its national home price index fell 14.1 percent in the first quarter compared with a year earlier, the lowest since its inception in 1988. The quarterly index covers all nine U.S. Census divisions.

Prices nationwide are at levels not seen since the third quarter of 2004, according to Maureen Maitland, a S&P vice president. However, the index is still up 60 percent versus 2000.

Two narrower indices set record declines in March versus the previous year. The 20-city index tumbled 14.4 percent, the lowest since that index was started in 2001. The 10-city index plunged 15.3 percent, a record in its 20-year history.

"There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path," said David Blitzer, chairman of S&P's index committee.

Nineteen of the 20 metro areas reported annual declines, with 15 of them posting record lows. Six metro areas lost more than 20 percent.

Las Vegas had the worst performance in March, falling 25.9 percent from a year earlier, followed by Miami and Phoenix. Only Charlotte, N.C., stayed above water, gaining less than 1 percent over the previous year.

Last week, the Office of Federal Housing Enterprise Oversight said home prices fell 3.1 percent in the first quarter, the largest drop in its 17-year history and only the second quarter of price declines recorded.

The OFHEO index is narrower in scope and is calculated using mortgages of $417,000 or less that are bought or backed by Fannie Mae or Freddie Mac. That excludes properties bought with some of the riskier types of home loans.

(This version CORRECTS that 20-city and 10-city metro area figures are for March sted 1st quarter) )

San Antonio Cops Force Blood Tests on Drivers

Trueveo
May 27, 2008

U.S. Economy: The Worst is Yet to Come

Mark Weisbrot
The Huffington Post
May 28, 2008

Since the U.S. economy showed positive growth for the last quarter, some commentators in the business press are saying that we are not necessarily going to have a recession, or that if there is one it will be mild. This is a bit like the proverbial story of the man who jumped out of a window 60 floors up, and then said “so far, so good,” as he passed the 30th floor.

The United States accumulated a massive, $8 trillion housing bubble during the decade from 1996-2006. Only about 40 percent of that bubble has now deflated. House prices are still falling at a 20 percent annual rate (over the last quarter). This means that the worst is yet to come, including another wave of mortgage defaults and write-downs. Even homeowners who are not in trouble will borrow increasingly less against their homes, reducing their spending.

President Bush says we are not in a recession. One commonly-used definition of a recession is two consecutive quarters of declining output (GDP). The first quarter of 2008 came in at 0.6 percent, although it would have been negative if not for inventory accumulation. So by this definition we cannot say with certainty that the recession has started, although it could well have started this quarter. Of course, for most Americans it has felt like a recession hit some time ago, with real wages flat since the end of 2002, and household income not growing for most of the six-and-a-half year economic expansion.

The National Bureau of Economic Research will eventually decide on the official onset of the recession, but even its definition is arbitrary. All the indicators of a serious recession are swirling around us. The economy has lost jobs for four months in a row, which has never happened without a recession. Consumer confidence has dropped to a 28 year low - a level not seen since Jimmy Carter was president. Home foreclosure filings are up 65 percent over last year. And now commercial real estate prices are heading south, dropping 6.2 percent in the first quarter.

With oil prices hitting record highs, and the Fed beginning to worry more about inflation, more restrictive lending practices and other fallout from the credit crunch, the near-term economic future looks even dimmer.

Some look to exports to lead the recovery, but these are only 11 percent of GDP, and consumption is about 70 percent. Still, the fall in the dollar over the last six years is helping - making our exports more competitive and reducing the subsidy that we have been giving to imports for many years. In a sign of how economic illiteracy prevails in the United States, most people (thanks largely to what they hear and read in the media) see the dollar’s decline as bad economic news.

We are facing the prospect of millions losing their homes, their jobs, their retirement savings, their health insurance, and their livelihoods.

This serious economic situation greatly raises the stakes of the 2008 election. What will the government do to help the victims of economic mismanagement, to provide health insurance, and to restart the economy? Is it really more important to spend billions each week on the occupation of Iraq?

So far the government hasn’t done much. The stimulus package now taking effect, at about one percent of GDP and much of it likely to be saved, is quite small. The major legislation that Congress is considering for the housing crisis would mainly bail out lenders and investors while doing little for most underwater homeowners.

The voice of the people has yet to be heard on these questions in the halls of power. It had better get a lot louder, soon.