Seasonal Weakness Drives Down September Home Prices

(Update 1 clarifies Radar Logic Inc.’s company status as unaffiliated with First American Corp.) Home prices continued to fall in local markets across the nation in September, according to a monthly Housing Market Report released Monday by New York-based Radar Logic Inc. Seasonal trends, distressed-sale discounts and a generally weak market were said to have driven the declines in 23 of the 25 Metropolitan Statistical Areas (MSAs) Radar Logic tracks. The Milwaukee MSA ranked at the top of the list with a year-over-year 2.3 decline in price-per-square-foot (PPSF) — the increment Radar Logic uses to show a localized housing market view free of the variables of home size or property location. The Las Vegas market, however, ranked at the bottom of the list with a 32.2 percent PPSF decline since September 2007. Substantial proportions of foreclosure sales continued to drive large price declines in California, Arizona and Nevada, according to Radar Logic’s data. “The uniformity of price movements in September masks the diversity of market forces at play,” said CEO Michael Feder. “A closer look at historical price trends reveals that a normal seasonal lull is aggravating the downward price pressure created by foreclosures and a deflating price bubble, particularly in northern MSAs. In the spring, we expect to see the seasonal trend reverse and prices in healthier markets improve on a month-over-month basis.” Seeing as how Radar Logic reports its data 63 days after the last transaction date of each month, however, it follows that any change might not be seen until several months after trend reversals begin. In the mean time, transaction counts — or sales — continue to show a pressured market over previous data. Transaction counts increased on a month-over-month basis in Sacramento, Los Angeles, Detroit, Phoenix and Seattle (and the Manhattan Condo market, a subset within the New York market.) They remained neutral in San Jose at a 0.4 percent change, Chicago at 0.2 percent and Atlanta at -0.2 percent. The key to understanding the overall monthly price trends, however, is in motivated transactions — or foreclosure sales — as a percent of total transactions. Motivated sales increased in all 25 MSAs relative to September 2007. Motivated sales versus other sales increased 631.4 percent  over last year in the Los Angeles market, 321.2 percent in the Miami market and 723 percent in the Phoenix housing market. With so many foreclosure sales weighing in on the numbers, it’s easy to account for the year-over-year price-per-square-foot declines in Los Angeles (-27.4 percent), Miami (-23.9 percent) and Phoenix (-29.3 percent). “Within MSAs, motivated sales tended to be concentrated in low-price zip codes, while ‘other’ sales, those not classified as motivated, tended to be more evenly distributed across zip codes,” Radar Logic reported, based on its findings. But if motivated sales in these areas should taper off in coming years due to the Hope for Homeowners program rolling out in October, increased state intervention in foreclosure proceedings and a move by the GSEs and financial institutions to start modifying mortgages and keep people in their homes, the path of pricing and transactions count may turn in a different direction. Go to www.radarlogic.com to read the report. Write to Diana Golobay at [email protected].