LoanPerformance: Rate of Home Price Decline Continues to Improve

National home prices, including distressed sales, declined by 9.8% in September 2009 compared to September 2008, according to First American CoreLogic and its LoanPerformance Home Price Index. This was an improvement over August's year-over-year price decline of 11.1%. On a month-over-month basis, however, prices declined by 0.4% in September compared to August 2009, reversing a five-month trend of positive appreciation. The decline suggests the return of seasonal housing price patterns. The company revised its methodology for the HPI report beginning with August data to exclude distressed sales (short sales and REOs), which have become an increasingly large share of sales activity. Excluding distressed sales, year-over-year prices declined in September by -6.0% (in August non-distressed sales fell by -6.2% year-over-year). First American said this underscores the negative impact that distressed sales have on the HPI, as distressed sales continue to decline at a larger annual rate than non-distressed sales. When distressed sales were included Nevada (-25.5%) remained the top-ranked state for annual price depreciation with Arizona following close behind (-20.3%). Florida (-17.7%), Michigan (-15.1 %) and Idaho (-14.9%) round out the top five states for price declines. Excluding distressed sales, the worst five states for year-over-year price declines changes slightly. Nevada (-20.4%) still holds the top spot, followed by Arizona (-15.4%), Florida (-14.8%), Idaho (-10.9%) and Washington (-10.3%). The new forecast anticipates continued declines in most markets for the next six months, followed by a rebound in the spring. Above-average levels of foreclosures, inventories and unemployment will continue to take their toll in many major metropolitan markets in the short term. First American expects housing prices to bottom for most markets by March 2010 and then turn positive. In September 2010, the forecast projects that 12-month appreciation for national home prices, excluding distressed, will be 1.1%, bringing price levels for that segment of the market back to levels in May 2004.