Home Price Drop Affects Majority of Major Housing Markets

If you’ve been waiting for the most affordable time to apply for a mortgage loan, consider the following information:

Housing prices fell in nearly every major U.S. market in November, though some Northwest markets are bucking the trend, according to the latest numbers from Case Shiller Weiss.

For example:

• Boston housing market prices have swooned by 5 percent for the 12 months through November
• Detroit dropped by 4.5 percent
• Of 20 major cities tracked, all but three showed declines in November and seven recorded 12-month losses

Northwest cities have best weathered the storm with Seattle showing a year-over-year increase of 13 percent and those seeking an Oregon mortgage in Portland facing a gain of 11.6 percent. In November, Miami led all other markets with growth of 7.4 percent.

Case Shiller’s 20-city composite index, which also includes Chicago, New York, and San Diego, dropped 0.4 percent in November, after inching down 0.2 percent in October. For the 12 months, the index was up 1.7 percent, a far cry from its performance in 2005, when the index gained 15.7 percent.

“Country-wide, home price declines appear to show no signs of slowing down,” said Robert Shiller, chief economist at MacroMarkets LLC, in a release. “But while the downward trend is visible on a national level, it is clear that certain cities, like Boston and Detroit, have been more susceptible to the price correction.”

Some of the smart money is betting that the decline will continue. Assuming this is the case, power in negotiations with sellers shifted significantly to home mortgage loan applicants.

The derivatives may, however, exaggerate the market’s pessimism. According to Shiller, not only are the futures too thinly traded still to be a very accurate guide to market sentiment but there is also a risk premium to be taken into account.

At this point, more traders are interested in protecting themselves against loss than are interested in buying into a growing market. That imbalance drives down the prices of the futures.