Falling Home Prices: New Housing Nightmare

No American city is immune from the housing crisis, with real estate values falling from coast to coast.

Today, the average price of a home in 20 major U.S. cities is 19 percent lower than it was just a year ago.

But not all places are hit equally. New developments in cities such as Las Vegas, Los Angeles, Miami, Phoenix and San Francisco have plunged further than older homes in other cities.

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For instance, home prices have dropped 32.5 percent in Las Vegas in the last year. But in the Boston area, prices have only fallen 7.3 percent, according to the Standard & Poor's Case-Shiller home index.

Tampa prices are down 23.3 percent, while in Cleveland, they have only fallen 5.2 percent.

Stephanie Graves knows that pain all too well.

In October 2005, she bought a house in a new development for $850,000 in Irvine, Calif., outside Los Angeles, with an $85,000 down payment. In January 2007, the house was appraised at $940,000 and she refinanced. Today, she still owes $846,000 on the house.

Graves has worked in the mortgage business for 18 years. But about a year ago business started to dry up. Now she can no longer afford the $6,500-a-month mortgage. She owes more than her house is worth and is going through a bank short sale.

Her house was initially listed for $800,000. She got an offer for $750,000 but then an identical home down the block sold for $710,000. The bidders came back and offered $700,000. She now hopes to sell it for $710,000 and will rent an apartment for $1,800 to $2,300 a month.

Things have become so bad in her neighborhood that Graves has now gone into business helping homeowners facilitate short sales. She is even working out the short sale of her sister's condo.

"I come to tears once a week," Graves said of the work.

Home Prices Plunge

It's a similar story all across the country.

"Home prices, which peaked in mid-2006, continued their decline in 2009," said David M. Blitzer, who oversees the index at S&P. "There are very few bright spots that one can see in the data. Most of the nation appears to remain on a downward path."

But Jim Gillespie, president and CEO of Coldwell Banker Real Estate, disagrees.

"Where the biggest price drops are is where we've had the biggest price run-ups," Gillespie said. "A lot of it is new construction. A lot of it is condos in Florida and both condos and single-family homes in Las Vegas."

For instance, the number of sales in California is up dramatically because people are taking advantage of foreclosures and short sales like Graves'. But such sales bring down the average price of real estate.

"That's what's skewing the national numbers and making prices for real estate look worse than they are," Gillespie said. "The National Association of Realtors says 45 percent of all the homes sold in the country are distressed."

Gillespie notes that the Case-Shiller report only looks at 20 major metropolitan markets, including nine in distressed states.

"I'm not saying that prices are going up, they certainly are not, but they are not going down as much as Case-Shiller says," he added.

In the past few weeks, Gillespie said he has visited San Antonio; Raleigh, N.C.; Columbus, Ga.; Fayetteville, Ark.; and Shreveport, La.

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