National home prices, including distressed sales, declined by 10.1% in August 2009 compared to August 2008 – an improvement over July's year-over-year price decline (11.6%) and June's (14.1%), according to data from First American CoreLogic's LoanPerformance Home Price Index (HPI).
Excluding distressed sales, year-over-year prices declined in August by 6.2%, in July by 6.8% and in June by 8.3%, illustrating the significant negative impact that distressed sales are having on home prices. Home prices of distressed sales continue to decline at a larger annual rate than non-distressed sales.
For the five months beginning in March, the national HPI has seen month-over-month increases in home prices, with and without distressed sales. Some of the month-over-month improvement in the HPI may be related to normal seasonal patterns.
First American CoreLogic's HPI is projecting that declines will continue throughout the remainder of 2009 before hitting bottom in March of 2010. The projected declines in home prices are predicated on the expiration of the homebuyers' tax credit and the growing number of homes entering the foreclosure process.Â While the tax credit has given a short-term boost to both home sales and volume, its termination, combined with projected increases in foreclosure inventories, will place additional downward pressure on house prices this winter, First American CoreLogic says.
"We would expect the HPI to dip again as we move into the winter off-season, and continue to bounce around the bottom of the market in anticipation of a sustained recovery," says Mark Fleming, chief economist for First American CoreLogic. "While the majority of house-price declines appear to be behind us, there are still a number of economic and institutional factors that are working against a solid and sustainable turnaround in the housing sector."
The index forecasts positive appreciation beginning in spring 2010. Including distressed sales, cumulative peak-to-trough declines are projected to be 37% by March 2010. Excluding distressed sales, the cumulative peak-to-trough decline is projected at 24%.
The HPI for the segment of the market including distressed sales is sometimes more optimistic than the segment of the market excluding distressed sales. Consistent with the Federal Reserve's latest Beige Book release, the HPI indicates a continuing stronger recovery in the lower-priced segment of the housing market than in the higher-priced segment of the housing market in the near term. Much of the investment activity is occurring in the lower-priced segment of the market.
When distressed sales were included, Nevada remained the top-ranked state for annual price depreciation (24.4%), with Arizona following close behind (19.5%).
Florida (a 16.8% decline), California (12.9%) and Oregon (12.5%) round out the top five states for price declines. Of these five states, both Nevada and Arizona showed month-over-month decreases in their HPI.
Excluding distressed sales, the worst five states for year-over-year price declines changes slightly. Nevada (19.8%) still holds the top spot, followed by Florida (14.9%), Arizona (14.8%), Idaho (10.6%) and Washington (10.5%).Â
The Rust Belt markets (i.e., Michigan, Ohio and Indiana) have replaced the Sun Belt markets as those for which First American CoreLogic's model is projecting the largest further declines in house prices.
SOURCE: First American CoreLogic