And It All Goes Back To…

Most of the current problems in the financial markets can be traced back to the ongoing crash in housing prices. If you know any real estate agents (and who doesn’t?), they are probably telling you that the market is really not so bad. They may even be telling you the truth. It’s all about location, location, location.On the last Tuesday of every month Standard & Poor’s published its S&P/Case-Shiller Home Price Indices, which attempt to measure the change in housing prices in 20 large metropolitan areas. With the understanding that there are always exceptions to the rule, the Case-Shiller numbers are still a useful indicator of broad trends. Right now the trends are not good no matter where you are. The good news is that a few places are not quite as bad as others.

Nationally, the change in home prices for the 20 metro areas over the last twelve months (ending April 2008) was -15.3%. There is much variation between cities. In the Charlotte area, prices are almost unchanged at -0.1% in the last year. Unfortunately that’s as good as it gets. Other bright spots were Dallas (-3.4%), Denver (-4.7%), and Portland (also -4.7%). The bottom of the list was, not surprisingly, dominated by the sunny places where prices climbed the most during the boom. Las Vegas home prices were off -26.8%, Miami -26.7%, and Phoenix -25.0%. You can view the complete index results here.

Keep in mind this data is for single-family homes. From what I hear, people who bought the condominiums that sprouted like weeds in resort areas a few years ago are in even deeper trouble. The data also reflects only homes that actually sold. I suspect many owners are waiting for conditions to improve before they hang out the “For Sale” sign. Of course, the value of your home may not be especially important if you have no plans to sell. Nonetheless, housing drives a big part of the economy. Until the excess inventory gets worked off, plenty of other sectors will have a hard time gathering any momentum.