House prices have resumed their decline following the end of the first-time homebuyers tax credit, dropping 0.2 percent in August, according to Case-Shiller 20-City Index. The drop was led by a decline in the prices of homes in the bottom tier of the Case-Shiller index, and prices for homes in the bottom third of the housing market fell for all cities listed in the index. For several cities, the drop was quite sharp. In Tampa, prices in the bottom tier fell 3.1 percent, and in Washington — which has a relatively strong market overall — they fell 2.2 percent.

This is exactly what should have been expected given the end of the first-time buyers tax credit. The credit had a disproportionate effect on homes at the bottom end of the market, both because first-time buyers were more likely to be buying relatively low-cost homes and also because the credit is a larger share of the sale price of lower-cost homes.

For more information, read the full Housing Market Monitor.

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