Home Price Declines Stabilize in July: Report

During July, U.S. nominal home prices declined 10.9 percent from average prices one year ago, according to data released Tuesday afternoon by First American CoreLogic; the company also said that an early look at August’s data suggests a similar 10.8 percent annualized price drop. The company’s LoanPerformance Home Price Index has suggested a slowing in the rate of price declines nationwide the past few months, even if the price drops remain well into double-digit territory. Thirty-five states registered a year-over-year drop in prices, according to the data — that’s less than last month, but obviously still a large enough number to qualify price declines as widespread across most of the nation. Blazing the way, as they have been throughout the housing crisis, were the fearsome foursome of California, Florida, Arizona and Nevada. The nation’s worst-performing market year-over-year is Los Angeles and surrounding areas, CoreLogic said, which have seen prices fall 27.95 percent; the Oakland MSA isn’t far behind, with prices off 27.28 percent. The majority of those 35 states, however, saw comparatively less severe declines during July, somewhere between 0 and 5 percent. “Many of the California and Florida markets have continued strong, yet stable, depreciation rates; but excluding these two states, as well as Phoenix and Las Vegas, the markets with large rates of decline are in the Midwest and Washington, D.C.,” said Mark Fleming, chief economist at First American CoreLogic. Fleming has suggested for the past few months that “cautious optimism” is warranted in the home price data now being observed. “The recent price trend is similar to the Massachusetts and Texas house price declines in the 1980s and 1990s that took approximately two years to bottom out,” he said. “In both cases there was stabilization in the rate of decline before the lengthy recovery in price levels.” While stability in the decline of home prices is certainly an encouraging signal, it will do little to stanch a growing number of foreclosures on the market — which, by themselves, may end up exerting further downward pressure on prices. Fleming predicted an 80 percent increase in the total number of foreclosures and foreclosure filings during 2008 from one year ago, due to falling home prices. On Tuesday, the Office of Federal Housing Enterprise Oversight reported a 5.3 percent drop in July’s average home prices from one year ago; the OFHEO data only covers conforming mortgages, and excludes subprime and higher-balance loans that typically fall outside of conforming lending guidelines. While price indices will always vary in their findings, the emerging story appears to be this: things are still pretty bad, just not getting that much worse. Whether that trend holds or not is anyone’s guess going forward. For more information, visit http://www.facorelogic.com.