We just got the latest figures (PDF link) from S&P/Case-Shiller on home prices. The 20-city index dropped at a 19% year-over-year rate in January, up from the 18.6% rate of decline reported in December. On a monthly basis, the index fell 2.8%. That was up from the 2.6% drop reported in December and the fastest rate of decline in the nine years the index has been published.
All 20 cities in the index declined on both a monthly and yearly basis. On a year-over-year basis, the biggest declines were seen in Phoenix (-35%), Las Vegas (-32.5%), and San Francisco (-32.4%). Dallas (-4.9%) and Denver (-5.1%) were the best-performing markets by that metric.
Home prices continue to decline thanks to the abundance of for-sale inventory on the market, more aggressive discounting by distressed sellers, economic stress, and a lack of buyer confidence. We are seeing some evidence in some markets that bargain hunters are stepping up and buying — but only when the price is right. Traditional sellers who are trying to hold the line on pricing are still having a hard time getting purchasers to bite.
Moreover, efforts by the Fed and Treasury to drive mortgage rates lower appear to be mostly stimulating refinance activity, rather than home purchases. Case in point: The plunge in 30-year fixed rates to 4.63% in the week of March 20 led to a 41.5% surge in the Mortgage Bankers Association’s refinance index. But the purchase index gained just 4.2%.
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