Housing Bust Hits Hard Where Boom Was Biggest

Prices of existing homes dove in key metropolitan areas in October, most notably in Las Vegas, San Diego and Miami, where price increases outpaced those in other parts of the nation during the recent housing boom, according to a report released yesterday.

The report of the Standard & Poor's/Case-Shiller Home Price Indices was more downbeat news for the beleaguered housing industry, which faces daunting challenges in 2008.

The company reported that overall home prices in 20 metropolitan markets declined 6.1 percent in October from a year earlier, the biggest decline since it began tracking the markets in 2001. The company checks the resale prices of the same houses over time to determine how the price of a typical house changes.

"I think clearly October was one of the worst months we've had yet," said Michael D. Larson, a housing analyst for Weiss Research in Jupiter, Fla. "There's too much supply and not enough demand. The adjustment has got to come in the prices. I think prices will fall further."

Last month, the Commerce Department reported that new-home prices in October fell the most of any month since 1970, and that it would take 8.5 months to clear the inventory, up from 7.1 months in October 2006.

Housing experts said yesterday's report was not devastating news, just further affirmation of bad times.

"I don't think it's likely it will turn around in 2008," Guy Cecala, publisher of Inside Mortgage Finance in Bethesda, said about prices nationally. But in the Washington area, he said, trends can vary "neighborhood by neighborhood."

Lawrence Yun, chief economist of the National Association of Realtors, is among the more optimistic forecasters. He noted that the S&P/Case-Shiller report covered only 20 markets, and said prices were rising in markets in such states as Utah, Texas and Idaho.

"There's so much market variation from a consumer point of view," Yun said. "Consumers have to focus on the local markets."

Still, nationwide, on average, he said: "Certainly there's a large inventory overhang that needs to be drawn down, and the only way to draw that down is to see the prices decline."

In yesterday's report, Phoenix, Las Vegas, San Diego, Tampa and Miami -- among the places where prices rose the most during the housing boom -- recorded the biggest price declines, ranging from 10.6 to 12.4 percent. Prices fell 11.2 percent in Detroit, where the auto industry is ailing and the foreclosure rate is high.

In an indication of how dramatically the market has turned in some cities, this week one of Phoenix's largest real estate brokerages, Re/Max 2000, closed its 13 offices, citing poor sales and a difficult economy.

The Washington area recorded a 7 percent year-over-year drop, according to S&P. The smallest drops were in Atlanta (0.7 percent) and Dallas (0.1 percent).

Prices rose 4.3 percent in Charlotte, 3.3 percent in Seattle and 1.9 percent in Portland, Ore. However, in all three areas, prices were down in each of the past two months from the previous months.

"It may just be they're coming a little late to the party," said economist David Blitzer, chairman of S&P's index committee, which issued yesterday's report.

Overall, he described the nation's price declines as "moderately bad news."

"Clearly home prices fell in the 1990-91 period, and they've fallen in other recessions," Blitzer said. "We have seen house prices fall before and we have weathered it, and we will weather it again."