The September report of the S&P/Case-Shiller Home Price Index showed home prices down -17.4% from a year ago for the 20 city index and are off -18.3 for the 10 city index. From their peaks, the 10 city index is down -23.4% whilst the 20 city index has plunged -21.8%. From the report:
“The turmoil in the financial markets is placing further downward pressure on a housing market already weakened by its own fundamentals.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.
“All three aggregate indices and 13 of the 20 metro areas are reporting new record rates of decline. Looking at the returns of the U.S. National Index, prices are back to where they were in early 2004. As of September 2008, the 10-City Composite is down 23.4% from its peak, the 20-City Composite is down 21.8% and the National Composite is down 21.0%.”
The part in bold is interesting. Home prices are only back to levels they were in early 2004 as depicted in the chart below. Whilst the year over year declines may slow and even reverse in coming months, house prices will continue to come down to more affordable levels as the huge inventory of unsold homes is worked off.