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For Home Prices, It’s Back To At Least 2004
Is your home worth as much as it was seven years ago? If so, you’ve done better than most Americans.
What is most impressive about the decline in home prices is the ubiquity of the fall and how many years of gains were wiped out. Real estate agents, using some dubious statistics, used to claim that national home prices had never fallen for an entire year, even if there sometimes were regional markets that suffered for a year or two.
The most-followed index of home prices, the Standard & Poor’s/Case-Shiller 20-city composite, managed a small rise in April, the first gain after seven months of declines, but it remained at a level first reached in May 2003.
None of the 20 regions — each “city” is actually a collection of metropolitan areas that include suburbs — have prices now that are as high as they were in 2005, as can be seen in the accompanying graphic. Only four of them, New York, Washington, Seattle and Portland, Ore., have prices as high as they were in 2004.
The return of prices to levels seen many years ago has occurred in areas where prices soared during the boom as well as in regions where there seemed to be no bubble in home prices. From the end of 2001 through the end of 2006, prices in the San Francisco region rose 69 percent, far more than the modest 13 percent increase in the Denver area. But prices in both regions are back to where they were in 2001.
The effects of the decline are all the greater because banks made it easy to withdraw equity from homes when prices were rising, meaning that many more homeowners had mortgages that reflected peak values than would have been the case in earlier housing cycles.
The fact that so many homes are worth less than owners paid for them makes it much harder for those people to move, even if job prospects are better elsewhere, and has contributed to a slowdown in housing sales.
The indexes are based on comparisons of the price received for the same home at different times. During the first four months of this year, S.& P. counted 238,408 sales of homes for which it had a previous sale in its database. That was down 14 percent from the same period in 2010, when a temporary tax credit for some home buyers caused a modest recovery in prices that has since evaporated.
Only two of the 20 regions — San Francisco and Washington — now have prices that are up more than 10 percent from the bottom level reached during the downturn. The two other California regions — Los Angeles and San Diego — are the only ones up at least 5 percent from the lows.
It is possible that the indexes now are overstating housing weakness because sales of foreclosed homes, which may be in poor condition and which the sellers may be desperate to unload, make up a larger part of the available data. But there is no indication that the number of distressed sales is likely to decline anytime soon.