Housing's fall

Home prices continue to sink as foreclosures soar

By David M. Dickson (Contact) | Friday, August 15, 2008

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The housing market's two-year slide accelerated this spring, with the median home price falling 7.6 percent nationally compared with a year ago, the National Association of Realtors (NAR) said Thursday.

Meanwhile, foreclosure filings were 55 percent higher in July than a year earlier, according to RealtyTrac, an online marketplace for foreclosure properties

Adding to the bad news, Freddie Mac reported Thursday that the 30-year fixed rate for a conventional mortgage averaged 6.52 percent last week. That interest rate exceeded the average annual rates for each of the previous five years.

Home prices declined last quarter in more than three-fourths of the 150 metropolitan regions tracked by the NAR, the organization reported Thursday. Existing-home sales during the second quarter fell 16.3 percent compared with a year ago, the realtor group said.

During the April-June period, the median single-family home price - the level where half the homes sold for more and half sold for less - was $206,500. That was 7.6 percent below the $223,500 median price a year earlier.

In the Northeast and the West, median prices declined 9.6 percent and 17.4 percent, respectively. In the Washington-Arlington-Alexandria metropolitan area, prices were down 16.8 percent, according to the NAR report. The median home price in the West was down $61,000 in the past year.

The NAR numbers were "pretty grim," said Patrick Newport, housing economist for Global Insight. He also said the decline in home prices should be compared with rising inflation, which reached a 17-year high of 5.6 percent for the 12 months ending in July, the Labor Department reported Thursday. Mr. Newport also noted that a separate NAR report recently revealed inventories of homes for sale were at a 23-year high.

In July, foreclosure filings - default notices, auction sale notices and bank repossessions - increased to more than 272,000 throughout the country, RealtyTrac reported Thursday. That reflected an 8 percent increase over June and a 55 percent jump from a year ago.

"Bank repossessions continued to be the fastest-growing segment of foreclosure activity in July, posting a 184 percent year-over-year increase," said James Saccacio, chief executive officer of RealtyTrac.

The U.S. economy has been growing at an average annual rate below 1 percent since September. The credit and financial-market crises, which erupted a year ago, have produced tighter lending standards. Millions of homeowners now owe more than their homes are worth, making it difficult for them to re-finance their mortgages or sell their homes.

The NAR report said that foreclosures and "short sales" (where lenders agree to take a loss on a transaction) accounted for a third of home sales during the second quarter.

"The biggest home-sales gains over the previous quarter have been in some of the markets with the steepest and fastest price drops," said Lawrence Yun, NAR chief economist. For example, home sales increased 25 percent last quarter in California, but year-over-year housing values have plunged in Sacramento (36 percent), Riverside (33 percent) and Los Angeles (30 percent).

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