Reports: Home Prices Continue to Decline

Data through ""March 2009"":http://www.homeprice.standardandpoors.com , released Tuesday by ""Standard & Poor's"":http://www.standardandpoors.com , show the U.S. National Home Price Index continues to set record declines, a trend that began in late 2007 and prevailed throughout 2008. The company said residential real estate depreciation continued at a steady pace into March, with the overall index dropping 7.5 percent between the fourth quarter of 2008 and the first quarter of 2009. Nationally, home prices are down 19.1 percent compared to a year ago.
The S&P/Case Shiller 10-city composite dropped 2.1 percent from February to March, a pace equal to the decline between January and February. On an annual basis, the 10-city index is down 18.6 percent. The 20-city composite also fell at the same rate it did the month prior. In March, the 20-city figure recorded a decline of 2.2 percent, and a year-over-year depreciation of 18.7 percent.
David M. Blitzer, chairman of the index committee at Standard & Poor's, elaborated on the results, saying, ""All 20 metro areas are still showing negative annual rates of change in average home prices, with nine of the metro areas having record annual declines. Seventeen metro areas recorded a monthly decline in March.""
But Blitzer added, ""On a positive note, nine of MSAs are reporting a relative improvement in year-over-year returns and nine of the 20 metro areas saw an improvement in their monthly returns compared to February. Furthermore, this is the second month since October 2007 where the 10- and 20-city composites did not post a record annual decline.""
Still, Blitzer said, the March data shows no evidence that a recovery in home prices has begun.
According to S&P's study, Minneapolis, Detroit, and New York had the worst showing in March. Minneapolis' home values saw a record decline of 6.1 percent - representing the largest monthly decline of any metro area in the history of S&P's indices. For March, Detroit and New York also reported their largest monthly declines, returning -4.9 percent and -2.5 percent, respectively.
The cities that fared the best, based on S&P's market data, were Charlotte, where prices actually increased by 0.3 percent; Denver, which had a gain of 0.1 percent; and Dallas, where property values remained flat from February to March.
In terms of annual declines, the three worst performing metros in S&P's analysis continue to be the same three from the Sunbelt, each reporting negative returns in excess of 30 percent. Phoenix was down 36 percent, Las Vegas declined 31.2 percent, and San Francisco fell 30.1 percent. S&P reports that Denver, Dallas, and Boston continue to fare the best in terms of annual declines, down only 5.5 percent, 5.6 percent, and 8 percent, respectively.
The ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) released a similar ""home price study"":http://www.fhfa.gov/webfiles/2399/1q09hpi.pdf on Wednesday, which confirmed continued declines in property values, but at a more modest pace.
FHFA's purchase-only Home Price Index (HPI) showed that in the first quarter of 2009, U.S. home prices fell 0.5 percent compared to the fourth quarter of last year. The agency reported that nationally, property values actually increased in January and February, but were offset by a decline in March. The first quarter depreciation of only half a percentage point is a much slower pace than the 3.3 percent decline reported for the prior quarterly period, FHFA said. Over the past year, the agency says prices have fallen 7.1 percent.
FHFA’s all-transactions HPI, which includes data from both home purchases and refinancings, showed more strength over the latest quarter than the purchase-only index. The all-transactions figure rose 0.4 percent from the fourth quarter of last year and is down only 3.3 percent for the year.
FHFA Director James B. Lockhart, commented, ""Our latest data are consistent with growing evidence that housing market conditions may be stabilizing in some parts of the country, especially areas not covered by the other major repeat sales price index. I am hopeful that this first quarter data combined with recent market stimulus programs, such as the first-time homebuyer tax credit and President Obama’s Making Home Affordable program may mean that home price depreciation may be easing.""
The industry is certainly not short on home price reports and analysis, and sometimes the differing numbers that are tossed around can lead to confusion, particularly when it comes to housing data that varies significantly from market to market. Both the S&P and FHFA indexes employ the same fundamental repeat-valuations approach, but there are a number of data and methodology differences. FHFA explained the dissimilarities in the two property value reports:
a. The S&P/Case-Shiller indexes only use purchase prices in index calibration, while the all-transactions HPI also includes refinance appraisals. FHFA’s purchase only series is restricted to purchase prices, as are the S&P/Case-Shiller indexes.
b. FHFA’s valuation data are derived from conforming, conventional mortgages provided by Fannie Mae and Freddie Mac. The S&P/Case-Shiller indexes use information obtained from county assessor and recorder offices.
c. The S&P/Case-Shiller indexes are value-weighted, meaning that price trends for more expensive homes have greater influence on estimated price changes than other homes. FHFA’s index weights price trends equally for all properties.
d. The geographic coverage of the indexes differs. The S&P/Case-Shiller National Home Price Index, for example, does not have valuation data from 13 states. FHFA’s U.S. index is calculated using data from all states.