Home Prices, Halloween Edition

Last week, Standard and Poor’s released the latest Case-Shiller home price index. Appropriately in time for Halloween, the numbers were scary, and US home prices were, on average, down for the eighth month in a row.

The index, which measures home prices in twenty cities across the country, showed a decline of 4.4% in the past year. The ten-city index was even worse, dropping 5% in the past twelve months, a level of retreat in home prices that hasn’t been seen since June of 1991.

There is one bright spot in all of this negative news. While the rest of the country may be reeling, average home prices in Atlanta are holding steady. Where Detroit, for example, saw prices drop 9.3%, Atlanta has shown a slight increase of .8% over the last year.

In real-world terms, a home worth a hundred thousand dollars a year ago has gained in value… eight hundred bucks.

While hardly a spectacular return on investment, it sure beats the alternative.

For real estate investors, this reinforces how important it is to measure a property’s value and how much potential equity a property may have. As a group, investors sometimes tend to overestimate equity, and in today’s marketplace, doing so can potentially be very costly. No longer are investors able to count on three to six percent per year appreciation of the property, and the days of automatically being able to increase a sales price to cover closing costs are now behind us.

While it seems that Atlanta has weathered the price storm so far, we can’t assume that it will continue to do so for too much longer. There undoubtedly will be additional downward pressure on home prices as foreclosures continue to increase and more homes are listed for sale. Combined with the additional scrutiny that lenders are viewing appraisals, it is more likely than not that prices in Atlanta will fall as well.