Home Prices Seen Falling Dramatically In New Data
MICHELE NORRIS, Host:
The rush to refinance comes in the midst of grim news in the housing market. Over the past year, home prices have dropped a record amount. It's the sharpest drop in 50 years. The numbers come from the latest Case-Schiller Home Price Index, an index that was released yesterday by Standard & Poor's. Joining us to talk about that report is David Blitzer. He's chairman of the Index Committee at Standard & Poor's. Welcome to the program, Mr. Blitzer.
DAVID BLITZER: Good afternoon.
NORRIS: First of all, how much are home prices down from this time last year?
BLITZER: On a national basis, 16.5 or 17 percent. In some cities, for some kinds of homes, the declines are much, much smaller - three, four, five percent. In other cities, we're talking about 20, 25 percent or more.
NORRIS: Which cities have been hit the hardest?
BLITZER: Pretty much the Sun Belt and most of California. On the East Coast: Miami and Tampa. In the West: Phoenix, Las Vegas, San Diego, Los Angeles, and San Francisco. Those cities saw the biggest price increases from about 2000 through 2006. They've seen the biggest declines since then. From the peak, they're down 25, 30, 35 percent.
NORRIS: You know, some of the cities that seem to be faring a bit better, places like Charlotte and Dallas where the prices are down but only by a few percentage points, help us to understand what's happening there to insulate that housing market.
BLITZER: Where we've seen the biggest run-ups and the biggest declines - because it's the boom-bust cycle. We're obviously in the bust side of the cycle, but the boom counts as much. It was cities where there was a huge amount of building, where there was a lot of attractiveness, whether it was buying second homes or buying retirement homes or just come on down, this was a wonderful place to live or a wonderful place to be kind of thing. In all those areas, we saw a lot of building, we saw a lot of overbuilding, and massive development which has now proved to be excess development.
And it echoed through the entire housing market. It wasn't just the new homes at all, but it was all the homes. And looking at the numbers, it's concentrated in the cities I mentioned. Other places which didn't have that kind of incredible boom - the Northeast, Charlotte, Dallas, the Pacific Northwest - seem to have fared much better. They didn't have the boom, but they're fortunate not having the bust.
NORRIS: Have the prices for more expensive homes fallen more dramatically than moderately priced homes or what you might call starter homes? Or are these numbers fairly consist across category?
BLITZER: In the boom-bust cities, the less expensive the home, the bigger the gain in price and the bigger the fall. San Francisco is probably one of the extreme ones where the less expensive homes saw increases that were significantly higher than the mid-priced homes. And again, the mid-priced homes were much higher than the low-priced homes. So, you know, if you look at house prices that may have gone up 60 or 70 percent from 2000 to the peak in low-priced homes - excuse me, in high-priced homes, the low-priced homes probably saw prices more than double.
NORRIS: You know, when people look...
BLITZER: And then come down.
NORRIS: When people look at these numbers, they're looking to folks like you to help them understand what this means and the question of whether there's some sort of elasticity in the market. If the housing prices in some of these areas were overextended and now there's a question of whether they are, sort of, below market value, where might things start to settle?
BLITZER: Well, first of all, on a national basis, we're sort of back to where we were in 2004. We've wiped out four years of increases. Looking across the entire country, prices continue to go down, so we're probably going to wipe out a little more of the increase. But I think we will - certainly in the cities with less of the boom-bust - begin to see some settling coming in fairly soon. It doesn't mean we're going to stick where we are now, but we're probably looking, you know, not at 20 percent declines from now, but more like five or 10 percent declines going forward.
NORRIS: Mr. Blitzer, we're probably going to have to leave it at there - at that. Thanks so much, sir. David Blitzer is the chairman of the Index Committee at Standard & Poor's. Thanks very much.
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