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Home prices continue to slide

US home prices continue to slide, dropping at a record pace in December. Here are the latest details from Bloomberg's story:

"Home prices in 20 U.S. cities declined 18.5 percent in December from a year earlier, the fastest drop on record, as foreclosures climbed and sales sank.

The decrease in the S&P/Case-Shiller index was more than forecast and followed an 18.2 percent drop in November. The gauge has fallen every month since January 2007, and year-over-year records began in 2001. Separately, the Federal Housing Finance Board said prices in 2008 fell a record 8.2 percent.

Record foreclosures are contributing to declining property values and household wealth, crippling the consumer spending that makes up about 70 percent of the economy. The Obama administration has pledged to spend $275 billion to help stabilize the housing market, including $75 billion to bring down mortgage rates and encourage loan modifications.

“The massive inventory overhang in the market and the surge in foreclosures mean prices will continue to fall rapidly,” Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, said today in a note to clients. “The administration’s rescue plan will, in time, slow the rate of decline, but it won’t happen immediately.” "

Speaking of inventory, I'm also hearing that the banks are loaded down with foreclosed properties and are taking their sweet time to add these listings to the MLS database. A new report from Deutsche Bank analysts warns of the "shadow inventory" of bank-owned REO properties hanging over the residential real estate market.

Looks like the supply of unsold homes is still far outweighing demand, and it may stay that way for the next year or so, barring an unexpected explosion of real estate investment group buying. That should provide the backdrop for home prices reverting back towards their historical mean.

Related articles and posts:

1. Shiller: stocks and houses still expensive - Pragmatic Capitalist.

2. Home price projections - Pragmatic Capitalist.

3. Manhattan on Sale (NYC luxury real estate market) - Barron's

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