Home Prices Continue their Downward Trend

Housing prices are still being pressured downward by foreclosure and unemployment trends.

Remember that Bruce Springsteen song from the 1980s, "I'm Goin' Down?"  The Boss sang: "You used to love to drive me wild/But lately, girl, you get your kicks from just driving me down." If you wanted to put a theme song on what's been happening in the U.S. housing market lately, that old tune might be the perfect choice.

Values fall, foreclosures rise

The latest release of the S&P/Case-Shiller Home Price Indices confirms it:  All around the country, home prices are continuing to deteriorate. The S&P/Case-Shiller Indices include a National U.S. Home Price Index, as well as two separate indices that track housing prices from 10 and 20 major metro areas. For the month of September, all three indices showed double-digit declines from the prior year.

The Case-Shiller National Index fell 16.6 percent from the prior year, while the Composite-10 Index and Composite-20 Index slid 18.6 percent and 17.4 percent, respectively. Of the metro markets tracked, Las Vegas and Phoenix were the weakest; both logged year-over-year declines greater than 30 percent.

The prevalence of bank-owned, or REO, properties on the market continues to be a major factor in the housing price tailspin. When bank-owned properties sell for below-market prices, it pulls down the values of comparable homes in the neighborhood. This impact is far more pronounced right now, because of the sheer number of bank-owned homes being sold.  Back in August, RealtyTrac reported that it had roughly 750,000 properties in its national REO database. And some areas of the country are now reporting that bank-owned properties account for roughly half of the homes on the market.

A jobless homeowner is an unhappy homeowner

Rising unemployment is also working against home prices by putting pressure on existing homeowners and scaring potential buyers out of the market. Between May 2007 and September 2008, national unemployment climbed from 4.5 to 6.1 percent of the workforce.

More bloodletting on the way

Unfortunately, the trends in foreclosure and unemployment are likely to get worse.  That means that home prices may keep falling. According to RealtyTrac, nearly 280,000 homeowners received a foreclosure filing in October. That's 25 percent higher than the number of filings recorded in the same month last year, and 5 percent higher than the number recorded in September.

The unemployment picture doesn't look any better. In October and November, the national unemployment rate rose 40 and 20 basis points, respectively. At 6.7 percent, the unemployment rate is now the highest it's been since October of 1993.

As a homeowner, you'll have to accept these value declines as part of the territory. If you feel the need to do something, try cleaning up your debt and polishing up your résumé. After that, you might as well pop in those headphones and let Springsteen drown out the noise.