Home-Price Decline Continues, But More Slowly

October's national home prices, including distressed sales, declined by 7.8% year over year, according to First American CoreLogic and its LoanPerformance Home Price Index (HPI). This was an improvement over September's year-over-year price decline of 9.5%.

On a month-over-month basis, however, national home prices declined by 0.7% in October.

Excluding distressed sales, year-over-year prices declined in October by 5.8%. (By comparison, non-distressed sale prices fell by 6.3% year over year in September.) This finding again underscores the negative impact that distressed sales have on the HPI, First American CoreLogic says, as distressed sales continue to decline at a larger annual rate than non-distressed sales.

The HPI forecast continues to predict declines in the short term, followed by recovery beginning this spring. The 45 largest metropolitan markets are expected to decline by an average of another 4.2% before bottoming in March 2010, with the declines being driven primarily by high levels of foreclosure.

However, improvement in both levels of inventories and unemployment are projected to prevail next spring, resulting in an average year-over-year appreciation of just under 1% by October of 2010 for these metropolitan markets, First American CoreLogic says.

The largest HPI declines are predicted to occur in the Rust Belt states, such as a Michigan and Ohio, rather than the Sun Belt states. Over the next six months, large declines in the HPI are predicted in Detroit (12.7% decline); Warren-Troy-Farmington Hills, Mich. (11.4% decline); and Cleveland (6.3% decline).

Cities that are projected to experience the strongest recovery in 2010 are primarily concentrated in the large urban areas of California, including San Francisco (5.7% projected improvement), Los Angeles (5%), San Diego (4.7%) and Sacramento (4.6%).

When distressed sales were included, Nevada remained the top-ranked state for annual price depreciation, at 24.3%; followed by Arizona, at 17.3%; Florida, at 15.5%; Michigan, at 13.9%; and Idaho, at 12.1%. Of these, Nevada, Florida and Michigan also showed month-over-month decreases in their HPI.
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Excluding distressed sales, the worst five states for year-over-year price declines changes slightly. Nevada, Arizona and Florida still hold the top three spots, followed by West Virginia and Washington.

‘We are continuing to see improvements in the year-over-year home-price change, as prices have remained relatively stable since April,’ says Mark Fleming, chief economist for First American CoreLogic. ‘The additional government support for the housing market has stimulated demand and restricted supply in 2009. How these government supports are removed in 2010 and the moderation of pending inventory and negative equity will be critical to the continued stability of the housing market."

SOURCE: First American CoreLogic

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