Residential property prices in the US fell again in September following declines in August and are likely to keep falling well into next year, the latest analytical reports suggest.
National real estate prices fell for the second straight month in September after rising, albeit slightly in some cases, in the first six months of 2010, according to the new report from CoreLogic.
They fell 2.8% in September on top of a 1.1% drop in August and any gains made this year are now being wiped out. The figures show that year on year prices are down 0.73%.
‘We’re continuing to see price declines across the board with all but seven states seeing a decrease in home prices. This continued and widespread decline will put further pressure on negative equity and stall the housing recovery,’ said Mark Fleming, chief economist at CoreLogic.
Its index is now down more than 29% since peaking in April 2006 and excluding distressed sales, home prices are down nearly 20% over that time.
The five hardest hit states in September were Idaho, which saw prices drop 14%, Alabama down 9%, Mississippi down 8.3%, Florida down 7.7%, and New Mexico with a fall of 7.5%.
Some states saw price increases of less than 1%, most notably Maine which was down 0.38%, Alaska 0.44%, Virginia 0.77%, Nebraska 0.78% and California 0.86%, while prices rose 1.73% in North Dakota and 2.67% in New York.
The outlook though is pretty gloomy for sellers while buyers can look forward to bargain prices, according to analysts. Standard & Poor‘s analysts believe home prices will drop between 7% and 10% in 2011 as sales continue to plummet and demand weakens.
‘Low mortgage rates will likely continue to encourage refinancing, but their influence on home buying activities has been limited due to the weak housing market and a lack of demand,’ said S&P credit analyst Erkan Erturk.
Prices will continue to fall as long as the market works through a large backlog of distressed properties and recent foreclosure moratoriums from major lenders because of documentation problems have only delayed this work, Erturk added.
While analysts at Fiserv, a financial services technology provider said they expect property prices to fall another 7.1% before stabilizing at the end of 2011 with some markets falling into a double dip.
Nationally, home prices increased an average 3.6% in the second quarter of 2010 from a year ago, according to the Fiserv Case-Shiller Indexes, which is generated by the technology company using data from the Federal Housing Finance Agency. But the increases came from strong performances in higher priced markets such as San Diego, Washington, and the San Francisco Bay Area.
And on a micro level, prices actually fell in 70% of the 384 metro areas. Markets such as Detroit in Michigan, Boise, Idaho and Reno, Nevada and smaller markets in Florida and Oregon saw double-digit drops.
Fiserv chief economist David Stiff said the largest declines would come in those markets that had strong spring and summer price gains. ‘This is because the home buyer tax credit delayed the correction in home prices that is necessary to return housing affordability to its pre-bubble levels,’ he explained.
An example is Phoenix, Arizona, where property prices increased 5.5% in the second quarter from a year ago but are expected to fall by 16% over the next year. Prices are expected to drop 9.4% in Florida, 11.5% in Arizona and another 12.4% in Nevada.
‘If there are no downside surprises for the economy or the housing and mortgage markets, home prices should start to stabilize at the end of 2011,’ Stiff added.