Median Home Prices Continue to Decline, Taking Homeowner Equity With Them

The median price for a single-family home in the US dropped 7.7% in the first quarter to $196,300. The median price for a single-family home fell in 100 of 149 metropolitan areas, with Sacramento posting the largest decline of 29%. The metropolitan area around Riverside and San Bernardino was next with a 28% decline, followed by Lansing, Michigan with a 27% decline. Little surprise then that Bank of America increased its loss estimates on its home-equity loans to 2.5%, up from the 2% it projected just last month. Liam McGee, president of the consumer and small business division said at an investors conference today that Bank of America expects the economy to shrink in the second quarter.
Possibly causing some consternation at the investor conference was MeGee's statement about mistakes made during the housing boom. "We made some mistakes in 2005 and 2006 in how we grew this portfolio." He claimed that the bank has tightened lending standards since then. Although I personally did not have the opportunity to attend the conference, I can only imagine the furious rustling among analysts who jumped at the chance to pepper the banker with the questions:

Analyst I : Mr McGee, are you trying to tell us that the problems in your loan portfolio are the result of actual mistakes your bank made? Are you sure it wasn't linked to the credit crunch?

McGee: Yes, I'm certain we made some mistakes.

Analyst II: But that just doesn't make any sense. The losses in your portfolio had to have been caused by outside market forces that you had no control over.

McGee: No. I'm pretty sure, we lowered our underwriting standards to keep up our market share numbers and now we have to take some losses.

Analyst III: But would you say the worst is over?

McGee: No. As I said before, we just raised our estimates for loan losses just from the prior month based on new data. We'll probably need to raise them again.

Analyst IV: How do you expect us to buy your stock if you don't tell us that the worst is over?

McGee: I'm sorry. Was that a question?

Analyst V: What you are saying then is that you are the only bank that made mistakes, so it must be a terrible investment to buy your stock.

McGee: No, other banks made mistakes too. Possibly even bigger ones than we made

Analyst VI: Who made bigger mistakes than Bank of America?

McGee: Countrywide.