The housing bubble continues to deflate despite the Obama administration’s efforts to delay the inevitable. Housing prices sank faster in September than in any time this year after seeing them rise briefly in the spring, thanks to short-term interventions by the federal government. As foreclosures start increasing, values will drop even further:
Home prices are falling faster in the nation’s largest cities, and a record number of foreclosures are expected to push prices down further through next year.
The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday fell 0.7 percent in September from August. Eighteen of the cities recorded monthly price declines.
Cleveland recorded the largest decline. Prices there dropped 3 percent from a month earlier. Prices in San Francisco, Los Angeles and San Diego, which had been showing strength this year, also dropped in September from August.
Interestingly, two metro areas showed gains — Washington DC and Las Vegas. The nation’s capitol hasn’t had the foreclosure issues of other major metropolitan areas, mainly because unemployment has barely made a dent in DC. Las Vegas, on the other hand, has been one of the epicenters of the housing crisis, and its positive report may indicate that the worst of it has passed in Nevada, where unemployment is highest.
That high level of joblessness has been the main problem in the housing market, which is why the gimmicky interventions of the Obama administration have had no effect on the housing markets. All they did was delay the inevitable revaluation of assets in the marketplace after the collapse of the bubble, a process which will continue no matter how many interventions the White House stages. Demand simply isn’t materializing at current prices, which means that assets are still overvalued. Until demand rises, housing prices will continue to fall, pushed hard by cheap foreclosure sales that will make it more difficult for people to sell through normal channels.
The only way to boost demand is to put people back to work — and the only way to do that is to stop spending billions on cheap, gimmicky interventions.