Home prices drop for fourth straight quarter

15 08 2007

NEW YORK (CNNMoney.com) — The price of a typical home in the United States continues to drop but at a slower pace, according to a new survey.

During the second quarter, the median single-family home price was $223,800, 1.5 percent less than a year ago, according to the National Association of Realtors (NAR). It was the fourth consecutive quarter of price declines. Condo prices rose 1 percent to a median of $226,800.

Prices are off 1.7 percent from their peak of $227,600, recorded during the third quarter of 2005. The biggest year-over-year decline on record of 2.7 percent came in the fourth quarter of 2006.

Despite the continued drop, NAR’s senior economist, Lawrence Yun called the results, “encouraging.” 97 of the 149 metro areas surveyed recorded year-over-year price increases.

“Although home prices are relatively flat, more metro areas are showing price gains with general improvement since bottoming-out in the fourth quarter of 2006,” he said. “Recent mortgage disruptions will hold back sales temporarily, but the fundamental momentum clearly suggests stabilizing price trends in many local markets.”

Looking ahead, Yun’s forecast is one of the most optimistic among economists. He predicts home prices will turn slightly positive again by spring of 2008 and rise about 2 percent that year. He said prices will pick up more in 2009.

The number of home sales dropped a lot more than prices. The pace of single-family house and condo sales came to 5.91 million units annualized. That was down 10.8 percent compared with the second quarter of 2006 when sales were at a 6.63 million annual rate.

NAR’s results were widely expected, coming during a time when most housing market indicators have pointed to negative territory.

Home sales have fallen in many markets, inventories have stretched to a nearly eight-month supply, and new-home builders have been reporting big losses.

Mortgage rates rose from about 6.17 percent at the beginning of April to about 6.67 percent by the end of June for a 30-year, fixed-rate mortgage. The mortgage meltdown, spurred by problems with subprime loans, has led to a liquidity squeeze – many potential buyers can no longer qualify for a loan.

An increase in delinquencies among mortgage borrowers has also resulted in big spikes in foreclosure filings around the nation, unleashing a flood of vacant houses on the market.

Among individual metro areas, prices plunged furthest in Elmira, N.Y., down 17.9 percent to $71,700. Other big losers included Palm Bay, Fla. (down 15 percent to $183,300), Davenport, Iowa (down 11.3 percent to $103,300) and Sarasota, Fla. (down 11.3 percent to $311,400).

Pockets of strength included Salt Lake City, where prices rose 21.9 percent, the most of any metro area, to $233,100. In the Pacific Northwest, Salem, Ore. prices rose 16.7 percent to $227,900, and Spokane, Wash. prices went up 10.4 percent to $197,700.

Several small cities just outside the giant shadow of New York City enjoyed outsized price increases.

Reading, Penn. recorded an 11.2 percent increase to $157,800, and in nearby Allentown, prices jumped 12.8 percent to $274,500. Binghamton, N.Y. homes soared 19.8 percent to $111,200, and Glens Falls, N.Y. prices ramped up 10.7 percent to $175,700.

The New York metro area itself recorded a much more modest increase of 1.7 percent to $482,300.

The most expensive metro area was San Jose, California, where the median single-family house sold for $865,000. The bottom of the list was Elmira, with its $71,700 median.

Strong condo markets were again led by Salt Lake City, up 25.2 percent to $162,200, and included Texas cities Austin (up 14.9 percent to $171,100) and Dallas (up 12.2 percent to $133,200).

Syracuse, N.Y. recorded the largest condo losses of 13.9 percent to $123,000.

Three of the four U.S. regions experienced lower single-family home prices with the lone exception, the Northeast recording a 0.7 percent rise to $298,000.

The Midwest saw the largest regional downturn, 2.2 percent to $163,500. The West has the highest median prices, $349,400, up 0.4 percent. The South’s median home is $185,000 and fell 1.6 percent.

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