The median home price for U.S. metro areas posted a year-over-year decline in the first quarter of 2009, reflecting a high volume of foreclosures and short sales, which typically sell for 20 percent less than traditional homes, the NATIONAL ASSOCIATION OF REALTORS® reports.
The national median existing single-family price was $169,000, which is 13.8 percent below the first quarter of 2008 when conditions were closer to normal. Foreclosures and short sales accounted for nearly half of transactions in the first quarter.
NAR data shows that 134 out of 152 metropolitan statistical areas reported lower median existing single-family home prices in comparison with the first quarter of 2008, while 18 metros had price gains.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said there are two levels of pricing in the current market.
“Traditional homes in good condition have held their value much better, so owners shouldn’t be overly concerned about median prices,” he said. “Most sellers can expect a good return if they’ve been in their home for a normal period of home ownership and haven’t excessively tapped their equity.”
Existing-Home Sales Sluggish
Meanwhile, the sales pace remained slow overall. Total state existing-home sales, including single-family homes and condos, were at a seasonally adjusted annual rate of 4.59 million units in the first quarter, down 3.2 percent from 4.74 million units in the fourth quarter, and 6.8 percent below the 4.93 million-unit pace in the first quarter of 2008.
Seventeen states saw a sales increase from the fourth quarter, and six states were higher than a year ago; complete data for one state was not available. Sales in the first quarter do not reflect an impact from the first-time home buyer tax credit.
Lawrence Yun, NAR chief economist, sees the market in a lull before an upturn. “Over the past couple months, contract activity for home sales, buyer traffic and inquiries about the $8,000 tax credit have all increased,” he said. “Housing affordability conditions are at record high levels and we expect a measurable increase in home sales during the second half of the year, which would help stabilize prices in most areas.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 5.06 percent in the first quarter from 5.86 percent in the fourth quarter; the rate was 5.88 percent in the first quarter of 2008.
Yun said some areas showed dramatic drops in home prices. “In areas with the biggest price declines, we also see much higher levels of distressed sales which are distorting the data,” he said. “We are very much in a bifurcated market with sharp differences between foreclosures and short sales on one hand, and traditional homes on the other. In many cases homes are selling below replacement construction costs, which speaks to great value in the current market.”
State, Local Bright Spots
The largest first-quarter sales gain from a year ago was in Nevada, up 116.8 percent, followed by California which rose 80.6 percent; Arizona, up 50.2 percent; and Florida with a 25.0 percent increase. Virginia and Minnesota also experienced double-digit sales increases.
The largest single-family home price increase in the first quarter was in the Cumberland area of Maryland and West Virginia, where the median price of $114,900 rose 21.1 percent from a year ago.
Next was the Davenport-Moline-Rock Island area of Iowa and Illinois at $100,300, up 13.8 percent from the first quarter of 2008, followed by Columbia, Mo., where the median price increased 6.0 percent to $152,600.
Median first-quarter metro area single-family home prices ranged from a very affordable $30,300 in the Saginaw-Saginaw Township North area of Michigan to $570,000 in Honolulu. The second most expensive area was the San Jose-Sunnyvale-Santa Clara area of California, at $450,000, followed by the Anaheim-Santa Ana-Irvine area of California at $435,800.
Other affordable markets include Akron, Ohio, at $50,100, and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania at $51,200.
Condo Trends
In the condo sector, metro area condominium and cooperative prices – covering changes in 56 metro areas – showed the national median existing-condo price was $172,800 in the first quarter, down 20.2 percent from the first quarter of 2008. Five metros showed annual increases in the median condo price and 51 areas had declines.
The strongest condo price increases were in Portland-South Portland-Biddeford, Maine, at $196,900, up 11.2 percent, followed by the Wichita, Kan., area, where the median condo price of $113,900 rose 6.8 percent from the first quarter of 2008, and Bismarck, N.D., at $132,400, up 6.0 percent.
Metro area median existing-condo prices in the first quarter ranged from $75,200 in Las Vegas-Paradise, Nev., to $345,900 in San Francisco-Oakland-Fremont. The second most expensive reported condo market was Honolulu at $300,000, followed by the New York-Wayne-White Plains area of New York and New Jersey at $282,300.
Other affordable condo markets include the Palm Bay-Melbourne-Titusville area of Florida at $90,600 in the first quarter, and the Sacramento-Arden-Arcade-Roseville area of California at $93,800.
Regional Sales Volume, Prices
Regionally, existing-home sales in the Northeast fell 10.3 percent in the first quarter to a pace of 693,000 units and are 20.1 percent below a year ago.
The median existing single-family home price in the Northeast declined 15.9 percent to $235,500 in the first quarter from the same period in 2008. The best gain in the region was in Syracuse, N.Y., where the median price of $113,700 rose 3.1 percent from the first quarter of 2008, followed by Buffalo-Niagara Falls, N.Y., at $99,200, up 2.7 percent, and Binghamton, N.Y., where the median rose 0.5 percent to $110,300.
In the Midwest, existing-home sales slipped 2.2 percent in the first quarter to a pace of 1.04 million and are 13.1 percent below a year ago.
The median existing single-family home price in the Midwest was down 6.8 percent to $132,400 in the first quarter from the same period in 2008. After Davenport-Moline-Rock Island and Columbia, the next strongest metro price increase in the region was in Springfield, Ill., where the median price of $111,400 was 3.9 percent higher than a year ago, followed by Topeka, Kan., at $106,500, up 3.1 percent, and Bloomington-Normal, Ill., at $153,800, up 1.9 percent.
In the South, existing-home sales declined 2.5 percent in the first quarter to an annual rate of 1.70 million and are 12.7 percent lower than the same period in 2008.
The median existing single-family home price in the South was $146,600 in the first quarter, down 10.8 percent from a year earlier. After Cumberland, the strongest price increase in the region was in Beaumont-Port Arthur, Texas, with a 5.0 percent gain to $129,100, followed by Oklahoma City, at $129,900, up 4.0 percent, and Shreveport-Bossier City, La., at $136,000, up 3.4 percent.
Existing-home sales in the West slipped 0.9 percent in the first quarter to an annual rate of 1.16 million but are 24.3 percent above a year ago.
The median existing single-family home price in the West was $237,600 in the first quarter, which is 19.8 percent below the first quarter of 2008. The strongest price gain in the West was in the Salt Lake City area, where the median price of $230,100 rose 1.9 percent from a year earlier, followed by Farmington, N.M., at $191,200, up 0.7 percent.
An increasing number of lenders are going after borrowers who sell their homes for less than they owe – known as a short sale – in order to recover more of the difference between the amount owed and the sale price.
Lenders say the factors that they consider when they decide to seek more money are:
- How large was the unpaid debt?
- Was the property an investment or a personal residence?
- How much money does the borrower make and what other assets does he have?
- What is the policy of the mortgage insurer or the holder of the second lien?
A PMI Group Inc. spokesman says the mortgage insurer “primarily target[s] borrowers who are not experiencing hardship – but those who simply elected to walk away from the property due to its decline in value.”
Source: The Wall Street Journal, Ruth Simon (04/30/2009)
“Distressed” Sales Impact Metro Area Home Prices
by NAR Research
Most metropolitan area median home prices trended down in the fourth quarter of 2008 compared to the same quarter in 2007. But a major factor impacting that downtrend is likely the share of “distressed” sales. The latest quarterly metropolitan area home price report from NAR indicates that 134 out of 153 metropolitan statistical areas experienced declines in median existing single-family home prices from the same period in 2007. One area was unchanged and 18 metros reported price gains. NAR’s quarterly survey on state-by-state existing home sales show that resales rose in only six states from the fourth quarter of 2007.
The largest single-family home price increase in the fourth quarter was in the Beaumont-Port Arthur area of Texas, where the median price of $132,600 rose 16.7 percent from a year ago. Next was the Bloomington-Normal IL area at $159,300, up 9.6 percent from the fourth quarter of 2007, followed by Dover DE where the median price increased 6.5 percent to $212,500.
Total state existing-home sales, including single-family and condominiums, were at a seasonally adjusted annual rate of 4.70 million units in the fourth quarter, down 6.4 percent from 5.02 million units in the third quarter, and were 5.9 percent below the 5.00 million-unit pace in the fourth quarter of 2007.
Behind the Numbers
Distressed sales – foreclosures and short sales – accounted for 45 percent of transactions in the fourth quarter of last year, compared to about 38 percent of transactions in the third. Such significant distressed sales activity dragged the national median existing single-family price down to $180,100. That is 12.4 percent below the median sales price in the fourth quarter of 2007 when conditions were more balanced.
Strong sales gains, particularly in lower price homes, were primarily in areas with price declines resulting from foreclosures. In California and Florida, where distressed sales accounted for roughly two-thirds of all sales, the median price fell by much more as lower priced home sales far outpaced higher priced sales. Areas with the steepest declines in single-family home prices, more than 30 percent below the fourth quarter of 2007, include Las Vegas-Paradise, seven metro areas in California, Phoenix-Mesa-Scottsdale, and three metros in Florida. These areas are attracting bargain hunters. Indeed, the largest sales gains in the fourth quarter (compared to a year earlier) were in Nevada (up 133.7 percent), followed by California (up 84.7 percent), Arizona (up 42.6 percent) and Florida (up 12.5 percent).
Regional Differences
The West experienced a sales gain. Existing-home sales in the West rose 2.6 percent in the fourth quarter to an annual rate of 1.17 million and were 26.5 percent above a year ago. But the region
also experienced the largest price decline. The median existing single-family home price in the West was $243,200 in the fourth quarter, 25.1 percent below the median price in the fourth quarter of 2007. With a strong prevalence of distressed homes selling at discounted prices in the West, there were no reported metro areas in the region showing median price gains from a year earlier.
Existing-home sales in the Northeast fell 11.9 percent in the fourth quarter to a pace of 760,000 units and were 13.9 percent below a year ago. Home price declines in the region were more moderate. The median existing single-family home price in the Northeast declined 4.7 percent to $248,800 in the fourth quarter from the same period in 2007. The best gain in the region was in Pittsfield MA where the median price of $206,000 rose 1.7 percent from the fourth quarter of 2007, followed by Reading PA at $155,100, up 1.0 percent, and Buffalo-Niagara Falls NY where the price rose 0.8 percent to $106,200.
In the South, existing-home sales declined 7.3 percent in the fourth quarter to an annual rate of 1.73 million and are 13.4 percent lower than the same period in 2007. Median home prices in the South also declined in single-digit territory. The median existing single-family home price in the South was $158,300 in the fourth quarter, down 7.5 percent from a year earlier. After Beaumont-Port Arthur and Dover, the strongest price increase in the region was in El Paso TX with a 5.3 percent gain to $140,700, followed by Jackson MS at $126,600, up 4.7 percent.
In the Midwest, existing-home sales dropped 9.3 percent in the fourth quarter to a pace of 1.04 million and were 12.4 percent below a year ago. The median existing single-family home price in the Midwest fell 10.6 percent to $139,500 in the fourth quarter from the same period in 2007. After Bloomington-Normal, the next strongest metro price increase in the region was in Bismarck ND where the median price of $164,300 was 6.0 percent higher than a year ago, followed by Decatur IL at $79,300, up 5.9 percent, and the Wichita KS area at $118,200, up 3.9 percent.
Condominium Prices
In the condo sector, metro area condominium and cooperative prices – covering changes in 56 metro areas – showed the national median existing-condo price was $186,000 in the fourth quarter, down 15.8 percent from the fourth quarter of 2007. Eight metros showed annual increases in the median condo price and 48 areas had declines. The strongest condo price increases were in the Dallas-Fort Worth-Arlington area at $149,500, up 14.1 percent, followed by Toledo, where the median condo price of $153,900 rose 11.4 percent from the fourth quarter of 2007, and the Philadelphia-Camden-Wilmington area at $210,200, up 10.2 percent.
Looking Ahead
The market is clearly depressed from job losses and consumer concerns about the economy. But buyers are responding to discounted prices and are slowly absorbing the excess inventory. Even so, it is important that they work with local professionals to properly gauge local neighborhood conditions. Foreclosures can heavily skew the broader home price figures much lower. Big discounts are not occurring in neighborhoods with few foreclosures. Assuming housing provisions in the economic stimulus package are quickly enacted and provide enough encouragement for home buyers, we could see a quick lift in home sales for the critical spring home buying season. If that occurs, home prices could begin to stabilize in many metro areas later this year as supply and demand begin to return to balance, which would greatly benefit the overall economy.
ESTATE 