House prices return to 2003

Tuesday, Feb. 23
Written 11:45 a.m. EST

HOME PRICES: House prices are back to where they were in the summer of 2003, according to the S&P/Case-Shiller national home price index.

According to the widely respected index, house prices at the end of 2009 were 2.5 percent lower than they had been at the end of 2008. But that's the national number. Metropolitan areas varied greatly. For example, the median home price in Las Vegas fell 20.6 percent in 2009, according to the Case-Shiller index. The San Francisco metro area saw a gain of 4.8 percent.

The index indicates that California seems to be recovering and Florida is getting worse. Prices were flat in 2009 in Los Angeles, and rose 2.7 percent in San Diego. Prices fell 9.9 percent in Miami and fell 11 percent in the Tampa metro area.

Here's a weird tidbit about Las Vegas: Although prices there fell precipitously in 2009, there was actually a turnaround at the end of the year. The median price in Vegas went up 0.2 percent in December. We'll wait to see if that's a trend or a one-month blip. "It's certainly possible that we'll see a more volatile market in Las Vegas going forward," Shiller says.

The numbers are so volatile that there's no point in forecasting what will come next, says Robert Shiller, the Yale economist and co-creator of the index. He says prices bounced up and down like this in 1991, at the end of a recession, and that prices then settled down for the better part of a decade before the beginning of the housing bubble. But Shiller doesn't think today is comparable to the early 1990s.

"The market is worried about the outlook, it's not really predicting any price decline but it's not predicting price increases, and the outlook is ... I think there's worry and a sense of the possibility of price decline, but it's really ambiguous right now as to where this market is heading," Shiller says.

S&P economist David Blitzer says he thinks the expiration of the homebuyer tax credits this spring won't have much effect on house prices. There is speculation that the tax credit boosts house prices, and that prices will fall after the tax credit expires.

NOT A LOT OF DETAILS: Last week, President Barack Obama announced a $1.5 billion initiative to prevent foreclosures in the states hardest hit by falling home prices. The program will require state housing finance agencies to act entrepreneurially.

The previous sentence is the first on the Web that combines "state housing finance agencies" with "entrepreneurially." Any predictions about the success of this endeavor?

"So this fund is going to help out-of-work homeowners avoid preventable foreclosures, and it will help homeowners who owe more than their homes are worth find a way to pay their mortgages that works for both the borrowers and the lenders alike, and will help folks who've taken out a second mortgage modify their loans," the president said in last week's announcement in Henderson, Nev.

The $1.5 billion will go to the states where the median home price has fallen 20 percent or more. Five states fit: Arizona, California, Florida, Michigan, Nevada. The housing finance agencies of those states will get money to, as Obama put it, help jobless homeowners avoid foreclosure. It's up to the housing finance agencies to come up with ways to reach that goal.

Not intending to be mean, I'll pick on my home state of Florida. Take a look at the home page for the Florida Housing Finance Corp. First of all, note that there's no page title, a sloppy oversight. Second, the navigation on the page reflects the agency's organizational chart; it's designed for employees and not for outsiders. The "Current Events" section is about board meetings and a strategic plan.

Do you think this agency will come up with anything innovative? If the agency is handed $300 million to help unemployed Floridians avoid foreclosure, do you think the money will be spent creatively and wisely? I'm sure the agency employs decent people, but they probably are trained to follow guidelines, not to invent solutions.


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