The rate of housing price decline will lead to a loss of $6 trillion in real housing wealth in 2008, according to a report from Washington D.C.-based think tank Center for Economic and Policy Research.
The group’s weekly Housing Market Monitor honed in on data released by S&P/Case Shiller yesterday that revealed an annual rate of price decline during the first quarter of about 25 percent.
To that end, the 20-city index incurred a loss of $6 trillion, or $85,000 in home equity on average per homeowner during the year.
The report also mentioned the record high vacancy rate announced earlier this week and the weakness in mortgage application volume, signaling no evidence of a turnaround anytime soon.
Additionally, the CEPR noted that mortgage rates hovering just above six percent likely won’t fall much lower, and additional cuts in the fed funds rate will actually drive rates higher.
That said, the Fed cut the Federal funds rate by a quarter point this afternoon, bringing it to an even two percent.
The discount rate was lowered a quarter point as well to 2.25 percent, and commercial banks are expected to follow suit and lower the prime rate to an even five percent, which is good news for home equity line of credit holders.
On the bright side, the report said that the slew of recent negative data implies a sharp housing decline, which will ultimately lead to a quicker bottom.