Increase in house prices is smallest in 11 years

Seattle-area house prices were up in October from a year earlier -- but by the smallest annual increase in more than a decade, according to a report released Wednesday.

The last time prices rose by less than October's 3.3 percent was in December 1996, according to Standard & Poor's S&P/Case-Shiller Home Price Indices.

Annual appreciation in Seattle has now been slowing for 20 consecutive months. October's price was down nearly 1 percent from September's, making it the third consecutive month-to-month drop.

S&P's 20-city index was down 6.1 percent from a year earlier and 1.4 percent from September. Both were record drops for that index, which goes back to 2000. The 10-city index, which goes back to the start of 1987, also set records, with a 6.7-percent annual decline and a 1.4-percent monthly drop.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," Robert Shiller, chief economist at MacroMarkets LLC, said in a statement accompanying the numbers. He noted that 11 of the 20 cities posted record annual declines in October, and all 20 saw monthly drops in both September and October.

Prices increased from October 2006 only in Seattle, Portland and Charlotte, N.C. Charlotte led the nation with a 4.3 percent increase.

Prices in Miami were down 12.4 percent from a year earlier, the most of any city, while San Diego had the biggest monthly drop, 2.6 percent.

Patrick Newport, U.S. economist for the analysis firm Global Insight, said "it seems only a matter of time" before Seattle and Portland post annual drops.

"Indeed, adjusting for (Consumer Price Index) inflation, prices in both cities slipped in October," he said. "Charlotte, which did not experience a housing bubble, in the end, may be the only city of the 20 that will be spared falling nominal house prices."

Unlike monthly sales statistics, the S&P indexes track the price of typical houses in a market by applying a formula to repeat sales of homes, adjusting for factors such as foreclosures, sales between family members, remodeling, neglect and time between sales. The indexes do not give an actual dollar value.

Median house sales prices in Western Washington, as reported by the Northwest Multiple Listing Service, are already lower than they were a year ago.

Harvard's Joint Center of Housing Studies has pointed to job losses and overbuilding as key indicators in how far prices may drop in any city. Overbuilding has particularly affected such cities as Las Vegas, Miami and Tampa, Fla., while job losses have hit Detroit hard.

Newport noted that nationwide inventory of existing houses rose in October from 10.2 months of supply to 10.5 months -- the most since July 1985. Nationwide, prices should drop about 10 percent over the next two to three years, he said.

"It is clear that houses nationally are vastly overvalued. But there are many paths to equilibrium," Newport said. "House prices might plunge. Alternatively, prices could grow slower than inflation for several years."

THE WEST

The best and worst western U.S. cities, year-over-year change in October prices for single-family existing homes:

SEATTLE

+3.3%

PORTLAND

+1.9%

PHOENIX

-10.6%

LAS VEGAS

-10.7%

SAN DIEGO

-11.1%