Falling Real Estate Prices Threaten Economic Recovery

 

Real estate prices across the country are dropping even further according to the S&P/Case-Shiller Index. As reported on CNNMoney.com by staff writer Les Christie, recent results show prices in all 20 key cities dropped 1.3% for an annualized decline of 15%. Six markets reached their lowest price levels since the beginning of the bust in mid-2006. They are Atlanta, GA, Charlotte, NC, Miami, Portland, OR, Seattle and Tampa, FL. Sales volume is down by 25%. If we are not already in a double-dip slump we may be soon.

The experts were forecasting 5% to 7% price erosion so the sudden drop has taken even those who watch the market daily by surprise. As expected, the drop began in June when the tax incentives expired. Then the overall economy failed to generate positive momentum. The inventory of homes for sale shows a 50% increase compared to last year at this time and many foreclosures held by banks are waiting for improvement in the market. The real estate slump runs counter to the signs of general economic improvement according to Richard DeKaser, an independent housing market analyst and founder of Woodley Park Research. This creates a drag on the economy.

Lower prices are a boon for homebuyers but a cautionary tale for those investing in real estate related securities. The initial adjustment of prices has already been made and now properties are even further undervalued. How long will this market last? After over 3 years there is no real end in sight.

Page Perry, is an Atlanta-based law firm with over 125 years of collective experience representing investors in securities-related litigation and arbitration. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.