Housing Prices Drop 11.4% in January

Single-family home prices in the top 10 metropolitan areas in the U.S. were down 11.4% in January compared to last year, according to the S&P/Case-Shiller home-price indexes. The move marks the latest in a series of blows to the housing market since the subprime collapse took its toll and forced thousands of foreclosures. These foreclosures led to a huge spike in supply that - when coupled with very little demand - led to these sharp declines in prices.

The usual suspects, Miami and Las Vegas, topped the list of losses. Both cities posted declines of 19.3% compared to last year and were followed by similar declines in Pheonix, Washington and Minneapolis. Meanwhile, Carlotte was the only city on the list to avoid a year-over-year decline by posting a 1.8% gain in housing prices. However, even that city saw its numbers down from last month.

Yesterday, the housing market got some relief as one side of the supply-demand equation received a boost. New home buyers turned out in numbers to snap up cheap properties for the first time in seven months, but even that didn’t help curb the decline of housing prices. Meanwhile, the slew of houses in foreclosure will likely keep supply significantly ahead of demand for the next few years, pushing prices down even further.

In the end, the housing market appears to be far away from recovery despite a small improvement on the demand side in February. Many economists and experts are predicting that housing prices will not begin a recovery until 2009 and won’t see normality until as late as 2010 unless there is some significant government intervention to reduce the number of foreclosures being forced into the market by banks looking to get some money back.

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