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Housing Takes It on the Chin, Again
by Mark Stein
Nov 27 2007
Nov 27 2007
Not only is the decline in home prices accelerating, but its ripple effects are threatening some local governments.
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Just when you thought the news on home prices couldn't get any worse, it has.
Standard & Poor's said Tuesday that its S&P/Case-Shiller index of home prices declined at a record pace in the third quarter. Meanwhile, the year-over-year fall tied the record for the 21-year-old index.
Falling home prices and the related rise in foreclosures are not only hurting homeowners and investors. They threaten to sink local governments that rely on property taxes. The U.S. Conference of Mayors said that the "foreclosure crisis" would result in a potential loss of $6.6 billion in tax revenues in the 10 hardest-hit states next year.
The declines will come as the national economy creates 524,000 fewer jobs, increasing state costs for unemployment insurance and other assistance. The report, prepared by the economic and financial analysis firm Global Insight, forecast that 128 metropolitan areas would experience "sluggish" economic growth of less than 2 percent in 2008—a full percentage point lower than would have occurred without the mortgage meltdown.
"Consistent with prior 2007 reports, there is no real positive news in today's data," Robert J. Shiller, chief economist at MacroMarkets said in a statement accompanying the S&P home-price index. "Most of the metro areas continue to show declining or decelerating returns on both an annual and monthly basis."
"Not that long ago economists said housing was the backbone of our economy," Douglas Palmer, the mayor of Trenton, New Jersey, and president of the mayors' conference, said at a meeting of mayors, mortgage industry representatives, and community advocates in Detroit. "Today the foreclosure crisis has the potential to break the back of our economy, as well as the backs of millions of American families, if we don't do something soon."
Mayor Kwame Kilpatrick of Detroit said falling house prices are not just a problem on Wall Street. "This issue is now the No. 1 economic challenge of many major American cities," he said.
The effect goes beyond lower property tax revenue. Global Insight forecast that the weak housing market would cause consumer spending growth to decelerate to 2 percent, even as personal incomes grow 3.1 percent.
Tampa, Florida, has suffered the sharpest decline in home prices this year: 11.1 percent. Miami is close behind, at 10 percent over the past 12 months. Detroit and San Diego followed with 9.6 percent declines.
The Conference of Mayors forecast that home prices would decline by an average of 7 percent across the U.S. in 2008, led by a 16 percent drop in California.
More on Portfolio.com:
Tom Monaghan's Unanswered Prayers
Standard & Poor's said Tuesday that its S&P/Case-Shiller index of home prices declined at a record pace in the third quarter. Meanwhile, the year-over-year fall tied the record for the 21-year-old index.
Falling home prices and the related rise in foreclosures are not only hurting homeowners and investors. They threaten to sink local governments that rely on property taxes. The U.S. Conference of Mayors said that the "foreclosure crisis" would result in a potential loss of $6.6 billion in tax revenues in the 10 hardest-hit states next year.
The declines will come as the national economy creates 524,000 fewer jobs, increasing state costs for unemployment insurance and other assistance. The report, prepared by the economic and financial analysis firm Global Insight, forecast that 128 metropolitan areas would experience "sluggish" economic growth of less than 2 percent in 2008—a full percentage point lower than would have occurred without the mortgage meltdown.
"Consistent with prior 2007 reports, there is no real positive news in today's data," Robert J. Shiller, chief economist at MacroMarkets said in a statement accompanying the S&P home-price index. "Most of the metro areas continue to show declining or decelerating returns on both an annual and monthly basis."
"Not that long ago economists said housing was the backbone of our economy," Douglas Palmer, the mayor of Trenton, New Jersey, and president of the mayors' conference, said at a meeting of mayors, mortgage industry representatives, and community advocates in Detroit. "Today the foreclosure crisis has the potential to break the back of our economy, as well as the backs of millions of American families, if we don't do something soon."
Mayor Kwame Kilpatrick of Detroit said falling house prices are not just a problem on Wall Street. "This issue is now the No. 1 economic challenge of many major American cities," he said.
The effect goes beyond lower property tax revenue. Global Insight forecast that the weak housing market would cause consumer spending growth to decelerate to 2 percent, even as personal incomes grow 3.1 percent.
Tampa, Florida, has suffered the sharpest decline in home prices this year: 11.1 percent. Miami is close behind, at 10 percent over the past 12 months. Detroit and San Diego followed with 9.6 percent declines.
The Conference of Mayors forecast that home prices would decline by an average of 7 percent across the U.S. in 2008, led by a 16 percent drop in California.
More on Portfolio.com:
Tom Monaghan's Unanswered Prayers
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