HPI Index Shows Narrowing Annual Price Decline

Home price declines will continue into the spring before beginning to stabilize and then recover modestly in the remainder of the year, according to the January Loan Performance Home Price Index from First American CoreLogic. Nationally, single-family house prices are expected to decline another 3.7% before bottoming in April. National home prices, including distressed sales, decreased 0.7% in January 2010 compared to January 2009, a big improvement over December's year-over-year price decline of 3.4%. Excluding distressed sales, year-over-year prices declined in January by 0.4%. On a month-over-month basis, the national average home price index decline accelerated, falling by 1.9% in January 2010 compared to 0.8% in December 2009, indicating the housing market still remains weak. The markets with the largest future price declines are in Michigan, Oregon, Nevada, Maryland and Arizona, with predicted declines in the 3.5% to 4.5% range. Markets expected to see appreciation soon are located in Alabama, South Dakota and Kansas, with predicted appreciation in the 0.5% to 1.5% range. Sales of distressed properties continue to skew both actual and predicted price declines downwards, the HPI said. Going forward, house prices may increase over the next year by 4.5%. Excluding distressed sales, over the next year house prices could increase by 5.6%. Two major unknowns may affect the forecast, including how much of the "shadow inventory" of homes may come on to the market later in the year, and the expiration (or possible extension) of the federal homebuyer tax credit in April which has stimulated sales activity and the clearing of inventory.