Home prices nationally fell 4.5% in the third quarter compared to the third quarter of 2006 according to the S&P/Case-Shiller index. And that’s the good news. The same index applied to 20 major US cities shows a three-month annualized decline in home values of 7.4% and a year-over-year decline of 4.95%. Values in all 20 cities fell in September, the most recent month in the survey. Many cities suffered huge annualized declines in home prices over the summer including Los Angeles (-10.7%), Tampa (-15.7%), Las Vegas (-14.3%), Phoenix (-12.95%), San Diego (-14%), and Miami (-21.15%) Yikes!
The broader implications of declining home values are discussed in an excellent report published today by the US Conference of Mayors. The report predicts that home prices will fall 7% nationally next year led by a 16% drop in California. This translates to a loss of $1.2 trillion dollars of homeowners’ equity. Problems in housing will ripple through the whole economy. US GDP will be lowered by $166 billion and more than half a million fewer new jobs will be created. The Gross Metropolitan Product (GMP) of our largest cities will take big hits. New York’s GMP will drop $10 billion, Los Angeles’ will fall $8.3 billion, while the GMP for Dallas, Washington DC and Chicago will lose nearly $4 billion each. State and city budgets will be curtailed as real estate taxes, sales taxes and realty transfer fees all decline. Tax revenues in California alone will be off by $4 billion. Remarkably the Mayors’ report does not predict a recession next year. In fact, it predicts GDP growth of 1.9%, which shows how resilient the US economy is…or what wishful thinkers politicians are.
The full report can be found at: