Home Sales Report Shows Big Price Drops Hit California
Yesterday, the National Association of Realtors released their quarterly report on existing home sales prices for metropolitan areas.
The report basically showed more of the same from last quarter, but the big difference was the number of areas in California that showed double-digit declines for the first time in many years.
There were also some surprising areas of strength, and others that showed resilience from declining prices. Here are some of the highlights:
Largest Price Declines
-18.5%: Sacramento, CA
-16.8% Riverside, CA
-16.8%: Jackson, MS
-13.0%: Ft. Myers, FL
-13.0%: Palm Bay, FL
-13.8%: Detroit, MI
-13.1%: Los Angeles, CA
-12.8%: Las Vegas, NV
-12.4%: Memphis, TN
-12.2%: Tampa, FL
-9.8%: San Diego, CA
Largest Price Gains
+19.0%: Cumberland, MD
+18.0%: Yakima, WA
+14.8%: Binghamton, NY
+14.4%: Springfield, IL
+13.5%: Bismarck, ND
+11.2%: San Jose, CA
+11.0%: Amarillo, TX
+10.7%: Atlantic City, NJ
Other Major Cities
+5.5%: San Francisco, CA
+0.5%: Dallas, TX
-1.1%: New York, NY
-2.6%: Chicago, IL
-5.1%: Washington, DC
-5.7%: Miami, FL
-6.3%: Denver, CO
-7.8%: Phoenix, AZ
The declines in the real estate market are well known by now, though they may not yet be fully discounted in the market. Falling home prices causes a decrease in the "wealth effect" that has boosted consumer confidence in recent years. As such, the economic slowdown is being driven by a retrenchment in consumer spending.
Additionally, the real estate woes for the most part have been primarily a residential ordeal. But if the weakness spreads to the commercial real estate market, the economy could take a bigger hit.
Of course, none of this is lost on the Fed, who is now lowering rates furiously to try to ameliorate the situation, which up until a month ago they seemed totally indifferent to. Monetary policy (read: rate cuts) will kick in at some point, but its too early to say we are out of the woods yet.
And for all of those people who for years said that real estate could only go up, the recent events in the housing/subprime/mortgage/bond insurance markets should be a wake up call that no asset class can grow at above-average rates for very long without reality setting in at some point.
long one declining Los Angeles home
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