Backlogged foreclosures, severe oversupply, and negative equity triggered a further decline in home prices in April, according to the latest RPX Monthly Housing Market Report from ""Radar Logic"":http://www.radarlogic.com.
The New York-based real estate data and analytics company tracks home prices in 25 major metropolitan areas across the country. Its latest index recorded a decline in the composite reading of 5.1 percent in April when compared to April 2010.
""Clearly, the very large supply of homes for sale or potentially for sale is weighing heavily on the market,"" said Michael Feder, president and CEO of Radar Logic.
""Perhaps more worrisome,"" Feder continued, ""is the clearly established discount on distressed properties. Reason would suggest this discount reflects the level at which buyers are comfortable they can achieve a reasonable rate of return. We expect this situation will continue for some time and will deter any truly robust economic recovery.""[COLUMN_BREAK]
Radar Logic also reports that the year-on-year decline was exacerbated because home prices in April 2010 were supported by tax credits and other government programs.
While the RPX Composite price increased 2 percent from March to April, the home price gauge remained below its level at the beginning of the year, marking only the third year-to-date decline through April in the last 10 years.
April's monthly sales rate remained more than 9 percent below April 2010. Radar Logic says sales of non-foreclosed homes increased more quickly than sales of foreclosed homes.
Foreclosed homes sell at a 39 percent discount to other homes on average, according to Radar Logic, so the decline in foreclosure sales as a percentage of total sales provided some support to the RPX Composite price. Without the mix, the month-over-month increase would be smaller.
Radar Logic contends that the decline in foreclosure sales as a percent of total sales is seasonal and does not indicate a lasting trend.
The supply and demand for foreclosed homes are more consistent throughout the year than supply and demand in the rest of the market because the financial institutions that sell foreclosed homes and the investors who buy most foreclosed homes are less sensitive to seasonal factors, such as weather and school schedules, than owner-occupants.
As demand and supply fluctuate less over the course of the year for foreclosed homes, foreclosure and REO sales typically increase as a percentage of the total during fall and decrease during spring.