Recent Home Price Dip Pale Compared to Five-Year Rise
While the latest S&P/Case-Shiller home price statistics for 20 of the nation’s largest metro markets showed a 4.4% year-over-year decline, a closer examination of the data reveals that, on average, these same markets appreciated in value by more than 50% over the past five years.
“It’s important to keep things in perspective,” said NAHB President Brian Catalde. “The current housing price correction is most pronounced in the once super-heated markets in California, Nevada, Florida and Arizona. In most other markets, price declines have been pretty modest.”
For example, in Chicago, home prices declined 1.3% between August 2006 and August 2007, but they posted a 34.2% gain for the five-year period between August 2002 and August 2007.
Among the 20 markets surveyed by S&P/Case-Shiller, which represent more than 40% of the U.S. population, four posted home price appreciation rates of more than 80% over the past five years and 11 registered gains exceeding 45%.
Home values in Los Angeles fell 5.7% in the year running from August 2006 to August 2007 — but including this loss, prices in L.A. were still up 88.9% since 2002. In Miami, home prices dropped 7.8% between August 2006 and August 2007 but price appreciation was still up 89.2% for the past five years.
The same pattern holds true in Phoenix and Las Vegas, which posted yearly declines of 8% and 7.6%, respectively, and where home values were up 80.2% and 83.2% for the five-year period.
While housing is a cyclical business, experience shows that over time, home values will stabilize and then move upward with the next recovery, said Catalde.
“To argue that home values will continue to decline and never recover, somebody has to make a convincing case that it will cost less to build a new home five years from now than it does today — and that’s just not going to happen,” said Catalde. “Despite today’s housing slowdown, the cost of land, labor and materials required to build new homes continues to go up.”
Furthermore, Catalde noted that the rapid appreciation rates in 2003 to 2005 were clearly unsustainable over the long-term, and that housing typically increases in value slightly above the overall inflation rate.
Homeownership as a long-term investment has a track record that is virtually unmatched by any other purchase in terms of its real benefits, he added. Home owners today have a combined $11 trillion in equity in their homes, against which they can borrow to help pay for college tuition, medical expenses and other needs. And housing offers important tax incentives to make owning a home more affordable.
To see tables comparing recent falling home prices with their five-year rise, click here.
For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.
Webcast of NAHB Fall Construction Forecast Available Till Feb. 5
The webcast of the NAHB Fall Construction Forecast Conference held in Washington, D.C. on Oct. 24. is available for purchase through Feb. 5.
The conference webcast includes panels of nationally recognized experts discussing economic trends, government policies, developments in the housing industry and the results from NAHB's recent surveys.
Purchasers will receive unlimited access to the webcast archive though Feb. 5, as well as electronic copies of the conference handouts and presentation material. Purchasers can watch at their own pace, rewind, fast forward and review important sections.
To Purchase the Webcast
To purchase the webcast, visit www.nahb.org/cfcwebcast.
For more information, contact Kate Carrigan at NAHB, or call her at 800-369-5242 x8244.
Want to Know the Housing Forecast for the Top 100 Metros?
Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview).
Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables.
To learn more, visit www.HousingEconomics.com.
Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown
What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn.
To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here.
To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar.
For assistance, call the NAHB Member Service Center at 800-368-5242.