Home/Mortgages/Accounting for Inflation – Home Prices Back to 2001 Levels

January 9, 2001 (Chris Moore)

Home prices in October continued to weaken as index levels for the 10- and 20-City Composites declined from September to October sending home prices back to 2001 levels when adjusted for inflation according to the latest S&P/Case-Shiller Home Price Indices.

David Blitzer, Chairman of the Index Committee S&P Indices, posted a chart on Stand & Poor’s HousingView blog showing the 10-City Composite Index in current dollars along with the Index deflated by the Consumer Price Index.

The chart demonstrates that home prices, when adjusted for inflation during the same time period, have fallen back to early 2001 levels and if they continue to fall, could fall as far back as to 1989 levels with Blitzer commenting, “The run-up and the run-down in prices in the 2000’s didn’t do much for average home values while they wreaked havoc on the economy.”

Nineteen of the 20 Metropolitan Statistical Areas (MSAs) posted monthly declines with only Phoenix showing a positive change of 0.3 percent. Both the 10-City and 20-City Composites posted monthly declines of 1.1 and 1.2 percent, respectively.

Eighteen of the 20 MSAs posted year-over-year declines with only Detroit and Washington D.C. posting price increases of 2.5 and 1.3 percent, respectively. Both the 10-City and 20-City Composites posted annual declines of 3.0 and 3.4 percent, respectively

“There was weakness in the monthly statistics, as 19 of the cities posted price declines in October over September. Eleven of the cities and both composites fell by 1.0% or more during the month. And even though some of the annual rates are improving, 18 cities and both Composites are still negative. Nationally, home prices are still below where they were a year ago. The 10-City Composite is down 3.0% and the 20-City is down 3.4% compared to October 2010,” Blitzer said.

Atlanta again posted the largest monthly index level decline of 5.0 percent followed by Detroit at 3.3 percent and Minneapolis with a 2.8 percent decrease in monthly home prices.

Atlanta was also the worse performing market year-over-year, declining 11.7 percent from last year with Las Vegas (-8.5%) and Minneapolis (-8.4%) trailing close behind.

Not accounting for inflation, average home prices across the United States remained at the same levels they were back in the summer of 2003. From their peak in September/October 2006, index levels for the 10-City Composite have declined 31.9 percent, while the index level for the 20 City Composite has fallen 32.1 percent.

Four markets, Atlanta, Cleveland, Detroit and Las Vegas, posted average prices that are below their January 2000 levels.

“In the October data, the only good news is some improvement in the annual rates of change in home prices, with 14 of 20 cities and both Composites seeing their annual rates of change improve. The crisis low for the 10-City Composite was back in April 2009; whereas it was a more recent March 2011 for the 20-City Composite. The 10-City Composite is about 2.4% above its relative low, and the 20-City Composite is about 1.9%,” Blitzer added.

Tags: S&P, Case-Shiller Home Price Indices, 10-City Composite, 20-City Composite, home prices, positive gains, seasonal trends