It's a long way down

The unprecedented rapid run-up in U.S. home prices during the past decade has turned to a steep descent, and the wild ride has left the housing market in uncharted territory, economist Robert J. Shiller said in a presentation today.

And that's not a good thing, in his view. "We are in the aftermath of the biggest housing boom in history," said Shiller (see Inman News article). "We're out of the range of normal variation in data. I take that as very significant. I think there is a significant chance of recession -- of probably over 50 percent at this point."

Price gains were out of step with basic economic fundamentals, and speculative behavior is a likely culprit, he noted.

A Standard & Poor's/Case-Shiller U.S. Home Price Index released today revealed a 4.5 percent drop in home prices in the third-quarter compared to the same quarter last year. A separate index that tracks 20 major metro areas revealed a 4.9 percent drop in prices from September 2006 to September 2007, with prices falling 9 percent or more in the Tampa, Miami, Detroit, San Diego and Las Vegas metro areas.

Despite falling prices, housing affordability remains an issue, according to an index report released today by the National Association of Home Builders.

The NAHB/Wells Fargo Housing Opportunity Index (see Inman News) found that nationwide, 42 percent of new and resale homes sold in the third quarter were affordable to families earning a median income of $59,000, compared with 40.4 percent in third-quarter 2006 and 43.1 percent in second-quarter 2007.

The national median price of homes sold in the third quarter was $239,000, down 3.6 percent compared with $248,000 in third-quarter 2006, according to the index report.

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