Two national home price indices released today reveal record declines during the fourth quarter of 2008.
According to the S&P/Case-Shiller U.S. National Home Price Index, home prices fell 18.2 percent during the fourth quarter compared to the previous year, marking the largest decline in the index’s 21-year history. The 10-City and 20-City Composites showed annual declines of 19.2 percent and 18.5 percent, respectively. All 20 metro areas surveyed showed annual declines, with eight areas recording home price depreciation of more than 20 percent.
The S&P index also finds that as of December 2008, average U.S. home prices have returned to levels last seen in the third quarter of 2003. From their peak in the second quarter of 2006, average home prices are down 26.7 percent nationally. Phoenix had the largest annual fourth-quarter decline with 34.0 percent, followed by Las Vegas (33.0 percent) and San Francisco (31.2 percent). Denver, Dallas, Cleveland and Boston fared best, posting declines of only 4.0 percent, 4.3 percent, 6.1 percent and 7.0 percent, respectively.
A related study, the Federal Housing Finance Agency’s (FHFA) House Price Index (HPI), showed price declines of 8.2 percent during the fourth quarter compared to the previous year and 3.4 percent from the third quarter. The FHFA index is calculated using purchase prices of homes with mortgages bought or guaranteed by Fannie Mae or Freddie Mac. Overall, prices fell over the last four quarters in 44 states and Washington, D.C. Eight states recorded price declines of more than 10 percent and 22 states had declines of more than 5 percent.
“Price declines continued in the fourth quarter although not as rapidly as some had expected,” says FHFA Director James Lockhart. “We are hopeful the housing initiatives announced last week by President Obama will begin to provide much-needed stability to the housing markets.”