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Predictions by housing bears that the fourth quarter will kick off a slump in housing prices that will last long into next year seem to be coming true a couple of months early, according to price reports released yesterday.
Yesterday CoreLogic reported its Home Price Index fell in August for the first time this year, dropping 1.5 percent from a year ago. Even excluding distressed sales, year-over-year prices declined 0.4 percent in August 2010.
Including distressed transactions, CoreLogic’s price index has fallen 28.2 percent since its peak in April 2006. Excluding distressed properties, the peak-to-current change for the same period is -19.6 percent.
The National Association of Realtors also reported prices are down. The national median existing-home price for all housing types was $171,700 in September, which is 2.4 percent below a year ago. Prices have declined every month since
July, a decline of $10,900 in the median home price.
Distressed homes accounted for 35 percent of sales in September compared with 34 percent in August; they were 29 percent in September 2009. The increased market share of foreclosures and short sales.
One of the first to raise an alarm about the threat to prices was Roelof Slump, Managing Director of Structured Finance Experts for Fitch Ratings, who told investors last month that home prices will fall another 10 percent before they stabilize in the second half of next year.
Slump said the inventory of distressed properties remains high and is expected to cause further home price declines, plus negative macroeconomic trends are expected to continue to impact the mortgage market.
A survey of 109 housing economists by MacroMarkets last week found opinions evenly split between a positive cumulative appreciation of more than 14 percent through 2014, while the pessimists are expecting an increase of less than 3 percent over the same period.
Pessimism is on the rise even among the real estate professionals and homeowners who have the most to lose. Nearly half of the 1,100 professionals participating in a recent survey by HomeGain expect prices to fall over the next six months. Forty-eight percent of agents and brokers and 33 percent of homeowners think that home prices will decrease over the next six months. This reflects an increase in the percentage of real estate professionals and homeowners who expect a decline in home prices from the second quarter HomeGain home prices survey. In that survey 33 percent of agents and brokers and 23 percent of homeowners expected home prices to decrease over the next six months.
CoreLogic found that the top five states with the highest appreciation in August, including distressed sales, were: Maine (+5.8 percent), New York (+3.7 percent), Connecticut (+2.5 percent), Virginia (+2.4 percent), and South Dakota (+2.1 percent).
The top five states with the greatest depreciation, including distressed sales, were Idaho (-14.0 percent), Alabama (-10.4 percent), Utah (-7.3 percent), Oregon (-6.3 percent) and Florida (-6.2 percent).
“Price declines are geographically expanding as 78 out of the largest 100 metropolitan areas are experiencing declines, up from 58 just one month ago,” said Mark Fleming, chief economist for CoreLogic.
October 26th, 2010 at 3:04 pm
The market will recover….
We experienced a real estate and business market in the late 80’s through the mid 90s durning the S&L crisis that was very similar to what we are seeing today.
A residential and commercial real estate market can be very slow to recover in areas where there is a wait and see approach, limited financing available or high unemployment. The wait and see approach is a mentality issue that goes away when the excess inventory of destressed, forclosed and vacant assets in a given area are no longer available. We experienced this in the return of our market after the S&L crisis. Stable home values will return when lending and employment markets return to a level similar to the time prior the decline. Where it is obvious that it would not be wise to return to the excessively low lending standards and financing scemes that lead to the bubble and panic of 08. Some return to easy financing in the prime and sub prime real estate and commercial paper markets must be restablished before you see a return of real estate values and unemployement rates indicative of the time prior to the decline.. Because people can seldom pay cash for real estate and other assets it only lends to reason that values are directly proportionate to the availability of financing. On the matter of forclosures and excessive inventory at this time it is surely prudent for the banks to streamline the lowering of interest rates on thier pending forclosures even if it is a temporary reduction in the interest rate to avoid excess inventory in these markets. This will stimulate cash flow for the banks and keep excessive inventory out of the local real estate markets which is well known to drive down home values and taxable values. Some forclosures are unavoidable when it comes to loss of employment however it is curtain that in many cases significantly lowering the interest rates for the homeowners and businesses in default will keep these people in place and keep their homes and businesses off of the already saturated market. It is time for the banks to come up with an easy to expidite low doc modification process to keep the excess of defaults off the market to stablize businesses and home values as well taxable municipal values and income tax..
It is important to remember that subprime interest rates are much higher than the discount rate leaving pleanty of room to adjust the payment to an affordable level and keep people in thier homes and businesses opporating.. It is also important to remember that the inflation in real estate that occured as a result of the building boom resulted in higher property taxes putting further strain on the homebuyers and investors. Interest rate relief and redily available financing for homeowners, investors and businesses should be high priority of this administration. –