Daily Briefing Weekend Edition

Not All Home Prices Dropping

By Amilda Dymi

Depreciation may well be a concern in everyone's mind right now, but the scare of vanishing home equity has not hit home in one out of three metropolitan areas in the United States where home prices increased in the first quarter, according to a survey by the National Association of Realtors.

In the first quarter, median existing single-family home prices were higher than a year earlier in 48 out of 149 metropolitan statistical areas, with another 100 metro areas reporting price declines and only one area remained unchanged.

Data also show only a small number of jumbo loan originations and higher foreclosures, so overall there are "greatly mixed conditions around the country," NAR said.

The numbers, however, only tell part of story, said NAR chief economist Lawrence Yun. "These are highly unusual results because there were very few jumbo loan originations in the latest quarter, so sales are much slower in high-cost areas, and at the same time foreclosures related to subprime mortgages rose," he said. "Neighborhoods with little subprime exposure are holding on very well, while prices have fallen in neighborhoods with a wide prevalence of subprime loans because more foreclosed properties are being sold at discounted prices."

NAR reported that a "proportionately larger slowdown" in home sales from a year ago seen in high-cost markets continues to drag down the aggregate national median price. Consequently, in the first quarter, the median existing single-family home price dropped by 7.7% to $196,300, compared to $212,600, the median price in the first quarter of 2007. Data show that, as a rule, the national median normally is a typical market price, where half of the homes sold for more and half sold for less.

The above mixed results have nonetheless generated optimistic forecasts from market experts.

Case in point, NAR president Richard Gaylord, a broker with Re/Max Real Estate Specialists in Long Beach, Calif., believes the U.S. market is very dynamic so the key to is to understand and look at both the bigger picture and local developments. "It's more important than ever to examine what's happening with home prices at the city and neighborhood level," he said. "The old real estate mantra of 'location, location, location' is perhaps more relevant today than ever before."

As to consumers, he suggests they work closely with Realtors who can provide "local expertise on what's going on in their own area," since "conditions can vary considerably from one neighborhood to the next."

Analyzing the national-local factor correlation, Mr. Yun stressed that while homeowners with subprime loans account for less than 10% of all homeowners, subprime mortgages account for more than half of all foreclosures. "Sharp price declines are principally in neighborhoods where subprime lending has been widely prevalent," he said.

In the first quarter, the typical seller purchased the home six years ago and saw "a sizable equity gain" despite a price drop from a year ago, NAR said. The median increase in value for sellers who purchased that home in the first quarter of 2002 is 23.8%, and the median home-equity accumulation is $37,700.

Regionally, in the first quarter, the largest single-family home price increase was the Binghamton, N.Y., area, where the median price of $109,700 rose by 11.8% compared to 2007. The second-largest gainer was Peoria, Ill., where prices increased by 10.4% compared to the first quarter of 2007 reaching $119,000. Next ranked the Spartanburg, S.C., area where the first-quarter median price increased 10.1% to $130,300.

Median first-quarter metro area single-family home prices ranged from very affordable to extremely expensive.

The most affordable area at $65,400 was in Saginaw, Mich. Other affordable markets were in the Youngstown-Warren-Boardman area of Ohio and Pennsylvania where single-family home prices were at $67,700, and Decatur, Ill., with a first-quarter median price of $79,400.

To nearly 12 times the amount of Saginaw, in the San Jose-Sunnyvale-Santa Clara area of California the median price was $780,000. The second most expensive area was San Francisco-Oakland-Fremont, at $701,700, followed by Honolulu at $620,000.

In the condo sector, metro area condominium and cooperative prices in 55 metro areas showed the national median existing condo price was $216,900 in the first quarter, down 3% from $223,700 in the first quarter of 2007. Twenty-three metros showed annual increases in the median condo price, 31 areas had price declines and one remained unchanged. The biggest condo price increases were in Bismarck, N.D., where the first-quarter price of $124,900 was 36.4% higher than in 2007. It was followed by the New Orleans-Metairie-Kenner area at $170,500, up 15.3%, and Wichita, Kan., at $106,600 up 11.7%.

Metro area median existing condo prices in the first quarter ranged from $106,600 in Wichita to $546,700 in the San Francisco-Oakland-Fremont area. The second most expensive condo market reported was Los Angeles-Long Beach-Santa Ana, at $343,700, followed by the New York-Wayne-White Plains, area of New York and New Jersey at $333,800. Other affordable condo markets include the Indianapolis area at $110,000, and Syracuse, N.Y., at $111,100.

Total state existing home sales, including single-family and condo, were at a seasonally adjusted annual rate of 4.95 million units in the first quarter, down 0.9% from an upwardly revised 5 million units in the fourth quarter, and are 22.2% below a 6.36-million-unit pace in the first quarter of 2007, NAR said.

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to 5.88% in the first quarter from 6.23% in the fourth quarter. The rate was 6.22% in the first quarter of 2007.

Regionally, the median existing single-family home price in the Northeast rose 3.2% to $280,000 in the first quarter from the same period in 2007. In the South, the median existing home price was $164,200 in the first quarter, down 7.5% from a year earlier. The median home price in the Midwest declined 7.9% to $142,700 in the first quarter from the same period in 2007. In the West, the median price was $296,300 in the first quarter, which is down 12.3%.