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Home Prices Slide in Third Quarter

By Steve Cook Real Estate Economy Watch   |   Oct. 26, 2010 at 9:03 AM   |   Comments

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.

© 2010 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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