Dennis Norman
Report Cautions That Shadow Inventory and End of Tax Credit Program May Result in Further Declines – Predicts a 3.01 Percent Home Price Decline in St. Louis In Next 12 Months.
A report released today by First American CoreLogic shows that national home prices increased 0.3 percent in February 2010 compared to February 2009 and the home price index for St. Louis increased 1.50 percent in February 2010 compared to February 2009
On a month-over-month basis, the national average home price index fell by 2.0 percent in February 2010 compared to January 2010, which was steeper than the previous one-month decline of 1.6 percent from December to January. Prices are typically weak in the winter months, so seasonal effects may be driving this one-month change.
Highlights from the February 2010 Report:
- Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to February 2010) is -30.6 percent. Excluding distressed properties, the peak-to-current change in the HPI is -21.7 percent.
- When distressed sales were included, Idaho (-13.7) moved into first place as the top-ranked state for annual price depreciation in February, followed by Nevada (-12.9 percent), Florida (-8.5 percent), Illinois (-8.3) and Oregon (-7.7 percent). All of these states also showed month-over-month decreases in their HPI between January and February. The distressed share in Idaho increased by about 11 percentage points over the past year, pulling down the annual price appreciation. The HPI for Idaho excluding distressed sales showed a much smaller annual decline (-5.2 percent).
- Excluding distressed sales, the worst five states for year-over-year price declines changes slightly. Nevada (-12.0 percent) is the top decliner, followed by Michigan (-9.1 percent), Florida (-7.5 percent), Arizona (-7.1 percent) and Utah (-5.8 percent).
- The five best states for year-over-year price appreciation excluding distressed sales are North Dakota, Hawaii, the District of Columbia, California, and Maine.
- Including distressed sales, 58 of the top 100 CBSAs declined on a year-over-year basis in February. This is down from 65 CBSAs in January. Orlando-Kissimmee, FL held the spot of top decliner, with a 14.8 percent year-over-year decline in February.
What Lies Ahead?
The CoreLogic report forecast was not as optimistic as it has been in the past and is showing a softer recvoery than in previous forecasts. The forecast calls for an increase in the inventory of homes for sale as interest rates are expected to rise, tax credits expire, and slower than expected sales over the winter due to the weather are all adding to the inventory.
Highlights from the forecast:
- Home prices in St. Louis are epected to deline 3.01 percent in the coming 12 months.
- After a modest increase this spring and summer, the national single-family combined index is projected to decline by 3.4 percent from February 2010 to February 2011 assuming the expiration of current Federal Housing Stimulus programs.
- 29 of the 45 largest Core Based Statistical Areas (CBSAs) are projected to experience continued price depreciation on a year-to-year basis according to the current forecast, compared to only 14 out of 45 in last month’s forecast.
- Markets that are expected to experience the largest amount of price depreciation through February 2011 are Detroit (-16.4 percent), Seattle (-5.8 percent), Atlanta (-4.5 percent), Cleveland (-4.1 percent) and Indianapolis (-3.8 percent). Markets that are expected to experience the biggest appreciation are Denver (5.2 percent), Las Vegas (5.0 percent), Riverside, CA (3.0 percent), and Houston (3.0 percent).
- The preponderance of distressed sales continues to exert downward pressure on the indices. When distressed sales are excluded from the data, the forecast becomes significantly more optimistic about the future direction of home prices outside of this market segment. The national HPI is projected to increase 4.9 percent year-to-year when these transactions are omitted from the analysis. The same is true of many states and CBSAs. For example, there is a 10-percentage point difference in the year-to-year HPI forecasts for California when distressed sales are included (-1.8 percent) compared to when they are not (8.0 percent.)
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