Home Price Index Declines Further in November

On a year-over-year basis, national home prices, including distressed sales, declined 5.7 percent in November 2009, according to the LoanPerformance Home Price Index (HPI) by ""First American CoreLogic."":http://www.facorelogic.com/ This was an improvement from October's year-over-year price decline of 7.6 percent. However, on a month-to-month basis, national home prices in November declined 0.2 percent from October 2009.

[IMAGE]

Excluding distressed sales, prices in November 2009 fell 5.1 percent from the same month in 2008. As distressed sales continue to decline at a larger annual rate than non-distressed sales, First American said this underscores the negative impact that distressed sales have on the HPI.

Following November's HPI decline, the forecast for most markets became more pessimistic. First American projects further declines followed by a recovery in the spring, but this recovery is now expected to be smaller in magnitude and to occur later than previous forecasts indicated. By November 2010, the HPI is expected to be down 0.23 percent, excluding distressed sales and up 2.94 percent, including distressed sales.

""On average, we are expecting home prices to turn around next spring,"" said Mark Fleming, chief economist for First American CoreLogic. ""While the share of REO sales are down, allowing price declines to moderate, there is concern moving forward with the levels of shadow inventory, negative equity, and the ability of modification programs to mitigate this risk.""

For the top 45 largest core based statistical areas, HPIs are projected to increase an average of only 1 percent through November 2010, with the bottom in most markets being reached by April or May of 2010. This, the company said, is a consequence of continued recent downturns in most HPIs, coupled with expectations of persistently high unemployment, foreclosures, and higher interest rates in 2010.

From its peak in April 2006, the HPI, including distressed transactions, has tumbled 30 percent through November, and the HPI, excluding distressed sales, has fallen 21.8 percent during the same period. With a 22.5 percent year-over-year decline, Nevada remained the top-ranked state for annual price depreciation when distressed sales were included. Nevada also took the top spot when distressed sales were excluded, with price depreciation coming in at 19.7 percent.

The markets that are expected to experience the largest year-over-year declines are in the traditional industrial centers of the Midwest and Great Lakes that have been hit hardest by the current recession, regardless of whether distressed sales are included or excluded. In addition, First American said the hard-hit markets of the Sun Belt are projected to hit their true bottom in the next 12 months, as these areas have had a substantially smaller rate in projected price declines relative to the pace of decline in 2009.