November Home Price Index Shows Further Decline

National home prices, including distressed sales, declined by 5.7% in November 2009 compared to November 2008, according to First American CoreLogic and its LoanPerformance Home Price Index (HPI). This was an improvement over October's year-over-year price decline of 7.6%. On a month-over-month basis, however, national home prices declined by 0.2% in November 2009 compared to October 2009.

Excluding distressed sales, year-over-year prices declined in November by 5.1%. (In October, non-distressed sales fell by 5.7% year over year). This underscores the negative impact that distressed sales have on the HPI, as distressed sales continue to decline at a larger annual rate than non-distressed sales, First American CoreLogic says.

The forecast for most markets became more pessimistic in November 2009, adds the company, which projects further declines followed by a recovery in the spring. That recovery, First American CoreLogic says, is now projected to be smaller in magnitude and to occur later than previous forecasts indicated. Nationally, the HPI is expected to be down 0.23%, excluding distressed sales (up 2.94% including distressed sales) by November 2010.

‘On average, we are expecting home prices to turn around next spring,’ says Mark Fleming, chief economist for First American CoreLogic. ‘While the share of REO sales are down, allowing price declines to moderate, there is concern moving forward with the levels of shadow inventory, negative equity and the ability of modification programs to mitigate this risk."

For the top 45 largest core-based statistical areas, HPIs are projected to rise an average of only 1% through November 2010, with the bottom in most markets being reached in April or May 2010. This is a consequence of continued recent downturns in most HPIs, as well as expectations of persistently high unemployment, foreclosures and higher interest rates this year, the company says.

Regardless of whether distressed transactions are included or excluded, the markets that are expected to experience the largest year-over-year declines are in the traditional industrial centers of the Midwest and Great Lakes that have been hit hardest by the current recession. Leading the list are four Michigan markets: Detroit (-13.1%), Sault Ste. Marie (-11%), Saginaw (-9.7%) and Kalamazoo (-7.8%).

The hard-hit markets of the Sun Belt are also predicted to hit their true bottom in the next 12 months, as evidenced by a substantially smaller rate in their projected price declines relative to the pace of decline in 2009. Select markets include: Las Vegas (-6.5%), Phoenix (-3.3%), Reno, Nev., (-3.3%) and Orlando, Fla. (-2.5%).

SOURCE: First American CoreLogic


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