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U.S. home prices continue record slide

Second straight year of double-digit declines; L.A. market off 37% from market peak.

February 25, 2009|Peter Y. Hong

U.S. single-family home prices fell at a record pace for a second straight year in 2008, according to a leading index released Tuesday.

The Standard & Poor's/Case-Shiller U.S. national home price index fell 18% in the fourth quarter of 2008 compared with the same period a year earlier, the largest decline in the index's 21-year history.

The sharpest year-to-year declines were in Phoenix (down 34%), Las Vegas (33%), San Francisco (31%), Miami (29%) and Los Angeles, including Orange County (26%).

In Las Vegas, Phoenix, Miami and San Francisco, home prices were down more than 40% from their market peaks, which occurred at different times. Los Angeles-area home prices ended 2008 down 37% from their late 2006 peak.

"There are very few, if any, pockets of turnaround," said David M. Blitzer, chairman of the index committee at Standard & Poor's. "Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines."

Overall, U.S. home prices are now at 2003 levels, according to the index.

Sun Belt regions that saw massive appreciation during the latest real estate bubble have shown the largest price declines. In other parts of the country, where prices did not climb to the same degree, declines have been more modest.

Dallas and Denver recorded 4% declines from a year earlier. Cleveland's prices fell 6% and Charlotte, N.C., and Boston were down 7%.

Price declines also varied greatly among market segments within the Los Angeles area. The lowest-priced homes, where foreclosure activity was greatest, have so far fallen more dramatically than more expensive homes.

The Case-Shiller index divides markets into thirds to show this difference. In Los Angeles, the lowest-priced third of homes has dropped 49% in price from its peak. The middle tier has fallen 38%. The most expensive tier has dropped 28% from peak levels, lagging behind the overall Los Angeles area's 37% decline from its peak.

Los Angeles-area prices are now at late 2003 levels, according to the index.

Economists say higher-priced areas are often slower to see price declines than other areas because wealthier homeowners can delay selling their houses longer in tough times.

The Case-Shiller index compares the sale prices of homes against their previous sales and corrects for factors that would alter a home's value, such as remodeling. Rather than state value with a dollar figure, an index number is used, with 100 representing prices in January 2000. The latest Los Angeles index number was 171.


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