Home prices are falling faster as the economy slows and turmoil in the mortgage markets continues.
Prices fell an average of 1.7% nationwide in the first quarter from the final three months of 2007, according to the Office of Federal Housing Enterprise Oversight. The decline was the largest in the index's 17-year history. The government index, which is seasonally adjusted and based on data for home purchases, had dropped 1.4% in the prior quarter. Compared with a year earlier, home prices dropped 3.1% in the first quarter.
Other nationwide indexes show steeper declines. The S&P/Case-Shiller index, which includes a broader variety of mortgages and which showed a nationwide drop of 8.9% in the fourth quarter from a year earlier, is set to release first-quarter figures next week.
"The OFHEO report shows the weakness in the housing market, but does not, in our view, fully portray the dire state of the market," Lehman Brothers economist Michelle Meyer said in a note to clients.
Let's review the basic issues in the housing market.
1.) Inventory of existing homes is sky-high.
2.) Foreclosures are increasing, which is adding to a bloated inventory total.
3.) The US consumer's confidence is dropping, which is lowering the possibility of more home purchases.
4.) The US consumer is already in debt up to his eyeballs, meaning the possibility of him taking on more mortgage debt is pretty low.
As a result of all these factors, we get price decline headlines like the one from today. And it's not going to end anytime soon because of the 4 above mentioned data points. The best we can hope for right now is that by the end of the year we'll actually have an idea about when the market will stabilize. Maybe.