Home Prices Continue to Depreciate

Further declines in home prices, driven by distressed sales, are expected in the early months of 2010 followed by a recovery this spring, but that is now projected to be much smaller and to occur later than previous forecasts indicated, according to First American CoreLogic and its LoanPerformance Home Price Index. National home prices, which include distressed sales, declined by 5.7% in November 2009 compared to November 2008. On a month-over-month basis, prices went down by 0.2% compared to October 2009. Nationally, the HPI is predicted to be down only 0.23% by November 2010. For the top 45 largest CBSAs, HPIs are projected to rise an average of only 1% through November 2010, with the bottom in most markets being reached in April or May of 2010 as a result of expectations of high unemployment, foreclosures and higher interest rates in 2010. When distressed sales were included Nevada (-22.6%) remained the top-ranked state for annual price depreciation followed by Arizona (-14.9%), Florida (-13.7%), Michigan (-12.6%) and Idaho (-11.0%). Excluding distressed sales, the worst five states for year-over-year price declines changes slightly. Nevada (-19.7%) still holds the top spot, followed by Arizona (-14.1%), Florida (-12.3%), Michigan (-10.6%)and West Virginia (-9.6%). The markets expected to experience the largest year-over-year declines are in the traditional industrial centers of the Midwest and Great Lakes that have been hit hardest by the current recession. These include the Michigan cities of Detroit (-13.1%), Sault Ste. Marie (-11.0%), Saginaw (-9.7%) and Kalamazoo (-7.8%). The hard-hit markets of the Sun Belt are also predicted to hit their true bottom in the next 12 months, as evidenced by a substantially smaller rate in their projected price declines relative to the pace of decline in 2009. These markets include Las Vegas (-6.5%), Phoenix (-3.3%), Reno (-3.3%) and Orlando (-2.5%). "While the share of REO sales are down, allowing price declines to moderate, there is concern moving forward with the levels of shadow inventory, negative equity, and the ability of modification programs to mitigate this risk," said Mark Fleming, chief economist for First American CoreLogic.