Home Prices 'Double-Dip' to New LowJune 1, 2011
Home prices continue to decline, falling 5.1% from a year ago, reaching a low not seen since 2002. It was the third straight quarter of decline, according to the S&P/Case-Shiller national home price index just released.
The index, which covers 80% of the housing market, confirmed "a double-dip in home prices across much of the nation," according to David Blitzer, spokesman for Standard and Poor's. "Home prices continue on their downward spiral with no relief in sight," said Blitzer
From their peak set five years ago, home prices are now down 32.7 percent.
The housing market experienced a brief recovery period starting in mid-2009, recovering nearly 5% of earlier losses, but after homebuyer tax credits expired last April, the slump resumed.
Home prices continue to be hammered by the high numbers of foreclosures flooding the market. Repossessed properties in poor condition are being offered at a big discount to conventionally sold homes and are driving down overall values.
Falling home prices are having a devastating impact on new home construction. According to Pat Newport, a housing market analyst for IHS Global Insight, "They are a key reason why builders aren't building new homes, even in the fastest growing states, like Texas," he said. "Existing homes are selling for so much less, the builders can't compete." Newport also pointed out that when developers build a new home for $300,000 it adds $300,000 to the economy, as measured by GDP. An existing-home sale just adds 5% or 6% in broker's commission.
New-home construction is normally an important contributor to economic recovery, but not this time, according to Weiss Research analyst, Mike Larson.
"Housing has been an albatross for the economy as opposed to an engine powering it," he said.
Experts agree that the current economic recovery would be much stronger if residential development had come back as it has in the past. "As a component of the GDP," said Larson, "housing has been out to lunch.”