Home Prices In Major Cities
Hit New Lows, Yanked Down By Foreclosures

GRAPHIC CREDIT:
Calculated Risk

Original Source Article by MARK BERGEN, Forbes.com

FORBES.com's Mark Bergen is reporting that the S&P/Case-Shiller home price index for October has been released, and the news isn't good. Nineteen of the twenty cities surveyed experienced further losses, on top of the losses of the previous five years. Overall, the numbers fell 3.4% from the previous October, more than the 3.2% which economists had forecasted.

Calculated Risk crunched the numbers to reveal how they’ve dipped below the lowest point since the housing bubble imploded:

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Atlanta seems to be experiencing the weakest market, posting a 5% decline. Chicago, Cleveland, Minneapolis, and Detroit also saw poor numbers, although Detroit had a 2.5% increase in housing values from last year—unsurprising but pleasant.

Peter Boockvar summarily tells us where we are:

"Bottom line, with prices now double dipping, the question is of course when will this end and
 that won’t likely be until more of the foreclosure backlogs get worked off."

Hidden in the report, however, is a green shoot, at least for investors.

“Some of the other housing statistics posted relatively healthy figures for November,” it reads,
“but it seems that most of the good news was confined to the multi-family sector.”

That sector, surging already in the housing starts, may not be enough to balance the countervailing force of foreclosures—particularly in a sprawling, single-family market like Atlanta.

The city is funneling funds into research on its neighborhoods hit worst by ongoing foreclosures, with the ambitious, ever-present hope of bringing in developers. It also has another strategy:

Mayor Kasim Reed has made dealing with foreclosures one of his main goals for 2012. His staff has talked with some of the largest banks operating in Atlanta to see if the city can take over foreclosed homes. Reed has said he is interested in turning foreclosed homes into inexpensive housing for first responders such as police officers and firefighters.

To boost property values, the author predicts that more cities will move to sweep in foreclosed homes in 2012. In theory, it’s a smart move:  the city can manage, sell, or even (ahem) rent it’s foreclosed properties, then spur development and remove blight. And the weight lifted from home prices will more than likely be worth the cost. Whether this plan is executed smartly is a whole other question.

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TOM’S COMMENTARY:

This ongoing drumbeat of the loss of home values should not be a surprise.  The fact is (in my opinion), we are in a downward spiral, with no natural control in place.  I disagree that the problem will be solved when we run out of homes to foreclose.  By that time, the damage to the American dream will be much more extensive than our nation is willing to endure.

The fact is, every month there is a new crop of homeowners who weren't underwater last month, but are now.  So, the price deflation is self-perpetuating.

More and more economists are pointing out what has been obvious from the beginning:  the drop in home values will only stop when the principal balances of mortgages are rolled back, to restore equity in their homes to Americans.

It's way past time for those responsible for this economic catastrophe, i.e., the Wall Street Bankers, to make it right by slashing mortgage balances.

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