The October report was released today by Standard & Poor’s for it’s S&P/Case-Shiller Home Price Indices (the leading measure of U.S. home prices) and it shows a deceleration from the growth in home prices – down 0.8 percent from just a year earlier. Some cities did show gains: Los Angeles, San Diego, San Francisco and Washington D.C. However six cities showed “hit their lowest levels since home prices started to fall in 2006 and 2007, meaning that average home prices in those markets have fallen beyond the recent lows seen in most other markets in the spring of 2009.”
This marks the third consecutive month of prices falling, but what does this mean? Will it bring more buyers into the market? Paul Dales, an economist with Capital Economics, estimates “that high unemployment, tight credit conditions and low confidence will mean that housing activity will remain uncomfortably weak for some time.”
According to one housing market writer, “house prices will keep falling in the areas where prices are still dangerously high compared to incomes and rents. Banks say a safe mortgage is a maximum of 3 times the buyer’s annual income with 20% down payment.”
Obama is expected by the end of January to finally put forward a housing plan expected to deal with the future of mortgage giants Fannie Mae and Freddie Mac (now 80% owned by tax payers in a bailout) that is expected to cost somewhere between $160 billion to $1 trillion.
Balance this not so good new with some actual good news – other indicators released today show stronger-than-expected growth in consumer spending – which could help give the economy a boost in coming months. We spent 5.5% more over the holidays than in 2009…this is the largest jump since 2005. But can we keep it up as retailers battle for our dollars and we see many familiar stores go out of business still? “The U.S. now has some 40 square feet of retail space for each person—the most per person in the world,” reports the Wall Street Journal.
Let’s face it. We all know the economy is still turbulent. And while we weather the storm we just want to when the end will be in sight.
