- The Washington Times - Wednesday, May 27, 2009

Home prices continued to plunge across the nation in March, and record foreclosure filings in April amid a huge overhang in housing inventory mean that home prices will continue their descent, analysts said Tuesday.

The S&P/Case-Shiller 20-city home-price index plunged 18.7 percent in March from a year ago. A separate S&P/Case-Shiller national home-price index sustained a 19.1 percent decline through the first quarter compared with the first quarter of 2008, the biggest descent in its 21-year history. Nationally, home prices have fallen 32.2 percent from their peak level in the second quarter of 2006.

Home prices in the D.C. area were down 18.4 percent over the past 12 months and 33.9 percent from their May 2006 peak.

“Declines in residential real estate continued at a steady pace into March,” said David Blitzer, chairman of the index committee. “We see no evidence that a recovery in home prices has begun.”

RELATED STORY: Home sales up in April

For the 20-city index, home prices have now fallen to their April 2003 levels.

“This suggests that, depending on the type of mortgage and the length of the mortgage, most homes purchased or refinanced over the last six years may now be under water - worth less than the mortgage,” said Charles W. McMillion, chief economist at D.C.-based MBG Information Services.

Earlier this month, RealtyTrac, which monitors foreclosure activity, reported that U.S. foreclosure filings hit a record 342,038 properties in April, an increase of 32 percent compared with April 2008. Total foreclosure activity in April soared by 75 percent in Florida and 42 percent in California compared with year-earlier levels.

The National Association of Realtors reported that about half of existing-home sales in March involved distressed properties, which drag down the prices of other homes in the neighborhood.

Record plunges in household net worth and soaring job losses have also been affecting foreclosures and home sales. During the 18-month period ending in December, the Federal Reserve has reported that household net worth plunged nearly $13 trillion. Since the recession began in December 2007, the private sector has shed 6 million jobs, including more than 4 million during the past six months.

As the number of unemployed workers continues to increase throughout this year and much of next year, analysts expect foreclosure activity to rise as well, putting additional downward pressure on home prices.

“Although greater affordability and lower house prices are helping to stabilize demand, house prices will remain under pressure from the oversupply of existing homes on the market and distressed sales,” said Alexander Miron of Moody’s Economy.com, which doesn’t expect house prices to bottom out until early next year following a total peak-to-trough decline of 38 percent.

Despite plunging home prices and soaring unemployment rates, consumer confidence increased at a healthy clip in May for the second month in a row. Expectations about the future have been by far the biggest contributor to the increase in consumer confidence.

“The moderation in the rate of decline in economic activity has raised hopes that an actual improvement will take hold in coming months,” said Mark Vitner, senior economist at Wachovia Economics Group. “But there has been little tangible improvement so far.”

The huge jump in expectations has corresponded closely with the rebound in the stock market since March 9. Mr. Vitner said he now wonders “if a green-shoot bubble is building up,” using the colorful term coined by Fed Chairman Ben S. Bernanke to describe what he considered favorable economic developments.

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