Housing Market Records Largest Drop In History Of S&P/Case-Shiller Index

The woes of the U.S. housing market are not news to most people, but how bad is it really? This may put things into perspective: The widely-used Standard Poor’s/Case-Shiller index saw an 11.4 percent drop in January—the largest in the history of the index, which was created in 1987.

The index has shown 19 consecutive months of falling house prices. Some people may believe that this is the absolute bottom, but this assumption may prove to be premature. If full-fledged recession takes hold in the U.S., as 71 percent of economists believe, then things are going to get much worse before they get better.

The S&P/Case-Shiller index tracks 20 metropolitan areas as part of its 20 city composite index. Of those 20 MSAs, only Charlotte, North Carolina showed a rise in home prices, but it was only 1.8 percent, which isn’t too exciting. Real estate in Charlotte has held up fairly well during this housing crisis for various reasons. For more background, read our article: Investing in Charlotte Real Estate.

On a darker note, 10 of the 20 cities tracked by the index showed double digit losses (Washington DC, Minneapolis, Phoenix, San Diego, Los Angeles, Detroit, Tampa, San Francisco, Las Vegas and Miami). In addition, all 20 of the cities tracked, including Charlotte, have shown diminishing growth over the past five months.

Investors should make sure that they are selecting investment properties very carefully. If you buy cash flow property that is making money from the day that you buy it, your risks are substantially reduced. Knowing how you will make the mortgage payment each month will help immensely in the volatile housing market we have today.