HOUSING: County prices fell faster in September, dashing recovery hopes

Booming sales failed to halt downward pressure

By ZACH FOX - Staff Writer | Tuesday, November 25, 2008 8:01 PM PST ∞

A closely watched report released Tuesday showed declines in local home prices accelerated in September, dashing hopes that the housing market was recovering amid booming sales in recent months.

In September, the number of houses sold in North County doubled from the same month a year earlier.

However, Tuesday's report showed that higher sales did not translate to stable prices, as depreciation across the county increased significantly that month.

"Just about every number in there was abysmal," said Patrick Newport, an economist with IHS Global Insight. "The numbers were really bad because they don't reflect what happened since September, when the economy really took a turn for the worse."

The report, known as Case-Shiller and released by New York firm Standard & Poor's, showed that prices in September were 26 percent below levels a year ago.

Prices were 34 percent below a November 2005 peak.

After adjusting for inflation, the index is off 30 percent from a year ago and 41 percent below the peak.

Prices continued to decline through September despite a boom in sales.

"You may be seeing more foreclosure sales, which would drive sales up," said David Blitzer, managing director of Standard & Poor's. "If you had a lot of foreclosure sales come in, they would tend to be at lower prices."

But it wasn't just cheap foreclosures that drove down prices in September.

Throughout the great real estate recession of 2008, the high-end market had dodged much of the declines.

September's report hinted that might change soon. For the first time since prices started diving, the high-end market nearly tracked the low-end in monthly declines.

Though too early to declare it a trend, the high-end market, defined as homes costing more than $487,596, lost 2.5 percent in one month while the low-end, or houses costing less than $331,366, fell 3 percent.

Over the previous six months, the low end fell an average of 2.9 percent per month; the high end ticked down just 1 percent per month on average.

During the summer months, the Case-Shiller index showed that prices were falling at a slower rate. But that pace has quickened of late, with September's drop the largest monthly decline since April.

And for the first-time in the index's history, Standard & Poor's released a seasonal adjustment on prices.

But tweaking for seasonal variations only made the county numbers look more dire, increasing the decline from August to September, and deepening the tumble from the market's peak to 36 percent.

And the one bright spot ---- booming sales numbers ---- might not last for long, said Newton, the economist.

House sales historically fall off during winter months, but a tumultuous few months on Wall Street should make buying even more difficult, he said.

"It's like every few weeks a new fire comes up. Lately, it's been Citi(group) and the auto industry," Newport said. "Until that goes away, we're not going to see an improvement in housing."

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com. Read his blog, "On the Realside," at bizblogs.nctimes.com.