Data Suggests Housing Sector Remains Sluggish

Recent analytical data show little evidence that housing values are stabilizing nationally, and that has increased worries about the fate of the government-sponsored enterprises and other companies whose fortunes are tied to the health of the mortgage finance sector.

Mortgage insurer PMI, which publishes a quarterly index assessing future prospects for home values, found the risk of further price declines "intensifying in areas with previous rapid home price growth."

On the positive side, PMI said that the risk that home prices will fall over the next two years has continued to decline in many other areas of the country.

Metropolitan areas with the highest risk of further price declines remain concentrated in California and Florida, with Riverside-San Bernardino in California, as well as the West Palm Beach-Boca Raton and Fort Lauderdale markets in Florida topping PMI's risk list.

Meanwhile, the risk of price declines is small in Dallas-Fort Worth and Pittsburgh.

Among the nation's 50 largest metropolitan statistical areas, 16 continue to face a high risk of price declines over the next two years. Fifteen of those MSAs were in California, Florida, Nevada and Arizona.

But the risk of further price declines diminished in 15 of the nation's largest MSAs, according to PMI.

David Berson, PMI's chief economist, said that compared with a year earlier, there has been an increase in the number of homes for sale relative to the number of buyers. In April, the ratio of homes for sale to buyers reached its highest level since 1985, he said in PMI's report.

"Given the magnitude of the inventory overhang, we expect national home price declines to continue into at least 2009," he said.

Other indicators also suggest that, at least for the most challenged markets, the housing sector is far from out of the woods. RealtyTrac reported that foreclosure activity was up 55% in July from one year earlier. The July level of foreclosure filings was up 8% from June.

According to RealtyTrac, one of every 464 households in the U.S. received a foreclosure filing during the month of July.

Nevada, California and Florida had the highest foreclosure rates.

But not everyone is worried about the fate of their home investment. A survey by the online realty data provider Zillow says that 62% of homeowners believe their home's value has increased or stayed the same during the past year. They may be kidding themselves, however. Zillow estimates that 77% of U.S. homes actually declined in value.

"Our survey reveals a wide gap between the perception homeowners have about their own home's value and the realities of a market in which three-quarters of homes declined in value in the past year," said Stan Humphries, Zillow vice president of data and analytics, in a news release. "Although many homeowners may believe the worst is over, we think this level of optimism is out of sync with actual market performance." (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/