By AnnaMaria Andriotis
In another sign the housing downturn may be far from over, home prices in several cities are hitting new lows as sellers unload homes at bigger losses than a year ago.
Home values fell for the sixth straight month in February, according to new figures released this morning from the S&P/Case-Shiller Home Price Indices. Nationally, home prices are down 3.5% from a year ago. But some cities are posting much bigger losses, with nine metro areas recording new post-crisis lows. Atlanta prices, for instance, have dropped 39% from their market peak and homes are selling at 1996 levels, while Chicago prices are back down to 2000 levels. Experts say the new round of losses suggests more trouble may be ahead for the overall housing market. “We’re at a critical turning point where we’re wondering if we’re going to recover or if there will be a second round of weakness,” says Brad Hunter, chief economist at Metrostudy, a housing market research and consulting firm.
Several factors have contributed to the latest price drops. Experts say that extended high unemployment in some cities, like Atlanta and Chicago, has weakened buyer demand and increased foreclosures that, in turn, have dragged down the values of surrounding homes. Separately, more distressed homes are coming on the market as banks try to sell the homes they repossessed. Most of these homes are selling at a discount — 29% lower than non-distressed homes according to RealtyTrac.com, which also lowers home prices.
To be sure, some cities are showing improvements. Home prices in five metro areas — Denver, Detroit, Miami, Minneapolis and Phoenix — rose slightly from a year ago, according to the S&P/Case-Shiller report.
But experts say it’s unclear when the following cities will bottom out. As a result, would-be sellers who purchased their homes less than a decade ago are unlikely to earn much of a return – and may not even earn back what they paid for it. Those who can no longer afford to pay their mortgage have little choice but to sell, but experts say those who can afford to stay put may want to hold onto their homes until their local housing market improves.