15 February 2010

Home Prices Recover in Some Metro Areas

The Wall Street Journal

Home prices rose in more than a third of U.S. metropolitan areas in the fourth quarter, the National Association of Realtors said Thursday as it pointed to a "broad stabilization" in values.

The median price for single-family home resales was up from a year earlier in 67 of the 151 U.S. metropolitan areas included in the trade group's quarterly survey. But other housing analysts say the home-price trend depends heavily on any recovery in the job market and on the pace of foreclosures.
The national median price for single-family homes was $172,900 in the fourth quarter, down 4.1% from a year earlier. That was the smallest decline in more than two years.

Among metro areas showing the biggest gains from a year earlier were Cleveland (25%), Akron, Ohio, (23%) and San Francisco (13%). Those increases don't denote a general surge in home values but rather show that sales of foreclosed homes at fire-sale prices made up a smaller percentage of overall sales than they did a year earlier.

Foreclosures dominated some markets a year ago. Nationwide, "distressed property," including foreclosures and homes at risk of foreclosure, accounted for 32% of fourth-quarter transactions, down from 37% a year earlier, the Realtors estimated.

Metro areas showing big price declines included Las Vegas and Ocala, Fla., (both down 23%) and Orlando (down 20%).

For condominiums, the median resale price in the quarter for 54 metro areas surveyed was $177,300, down 4.8% from a year earlier. Eleven of the metro areas showed higher condo prices, and the rest showed declines.

One major worry is that price drops have left many households without any equity in their homes. Homeowners who are "underwater"—owing more than the value of their homes—are more likely to abandon their houses if their incomes fall or they lose their jobs. That would create more foreclosures, weighing on home prices.

At the end of 2009, 21% of households with mortgages on single-family homes owed more than the current value of their homes, according to a new estimate from Zillow.com, a real-estate data provider.

State and federal efforts to avert or delay foreclosures by offering borrowers easier terms have created a huge backlog of unresolved cases, likely to lead to an eventual bulge in the supply of foreclosed homes. As of Dec. 31, about 3.9% of first-lien home mortgages were 120 days or more overdue but still not in the foreclosure process, according to LPS Applied Analytics. That represents about two million households.

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