Home prices have fallen nationwide for more than two years, but in three cities the current slump is shaping up as a lost decade.Houses in metropolitan Atlanta, Cleveland, and Detroit are now cheaper than they were on 9/11, even before adjusting for inflation.
In Atlanta, home prices fell in January to their lowest level since August 2001, according to the S&P/Case-Shiller Home Price Indices released Tuesday. In Cleveland, the price of the median single-family home stood at the lowest its been since November 2000. In long-suffering Detroit, homes were the cheapest they had been since August 1996 – when Bill Clinton was still in his first term as president.
Falling below the average
That plunge in home values is far below the index's 20-city average, which stood at levels not seen since last 2003. (Click here for evidence that the downturn is bottoming.)
The three cities' loss in home values is even more dramatic when inflation is taken into account. Computed that way, Atlanta home prices are back to 1996 levels; Cleveland is back to 1988; and Detroit is off the charts, since the index for that city didn't start until 1991 and the real price of a single-family home is far below that level.
Homes for less than a car
Put it this way: Despite the fall in the price of a car, you can pick up real estate in Detroit itself (as opposed to the metro area) for even less ($5,737 for the median residence in February), according to Realcomp, a Michigan real estate listing service. A year earlier, the median price stood at $10,000.
If nothing else, the lost decade(s) of these three cities undercut the conventional wisdom that buying a house is always a safe investment. As Yale economist Robert Shiller often points out, US housing prices have gone through long periods of deflation just like today.
The silver lining is that after such declines, homes are great stores of value.
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