American home prices dropped 2% in the third quarter according to today’s S&P Case-Shiller Home Price Index which has previously reported gains since the beginning of 2009. The Index report reveals a dip of 1.5% year over year and although it is a small dip, prices were not forecast to fall but to continue slowly rising.
Some of the drop can be attributed to the end of the homebuyer tax incentives that ended earlier this year which had been propping up the market while price drops can also be attributed to the overall American economy and a glut of supply in many major markets.
Of the 20 largest metro areas the S&P analyzes, the only two cities to experience a gain this month were Las Vegas and Washington, D.C. which both inched up less than half a percent. Year over year, prices rose 4.4% in Los Angeles, 4.5% in Washington D.C., 5% in San Diego and 5.5% in San Francisco while the biggest losses were felt in Chicago, losing 5.6% in value and Tampa down 4.3%.
Price declines will probably continue, not at crashing rates but likely as steadily as prices have risen over the last two years. With unemployment rates still causing the decline in the economy, 2011 may not be the year of recovery that some are claiming it will be. Home values are the cornerstone of a strengthening housing sector and without that indicator remaining healthy, housing is not in for a quick turnaround quite yet.