Year-Over-Year Decline is Narrowing

Inman News

 Tuesday, November 24, 2009

A U.S. home-price index posted its second consecutive quarterly increase, rising 3.1 percent in the third quarter, according to a report released today.

The U.S. National Home Price Index, which covers all nine U.S. Census divisions and is a part of the Standard & Poor’s/Case-Shiller Home Price Indices was down 8.9 percent, though, on a year-over-year basis.

This year-over-year decline in the third quarter is markedly lower than the 14.7 percent decline reported in the second quarter and smaller still than the 19 percent year-over-year drop in the first quarter, according to the report.

A separate, monthly index, the 20-City Composite Home Price Index, posted an annual decline of 9.4 percent. And the monthly index has experienced gains in its annual rates of return during every month since the beginning of the year.

September saw a 0.3 percent increase from August’s levels, for example.

As of third-quarter 2009, U.S. home prices have returned to their August 2003 levels, according to the index.

“We have seen broad improvement in home prices for most of the past six months,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s.

“However, the gains in the most recent month are more modest than during the seasonally strong summer months. Fewer cities saw month-to-month improvements in September than in August in both seasonally adjusted and unadjusted figures.”

Also this week, the National Association of Realtors reported that sales of existing U.S. homes rose substantially and inventories shrank in October. Home sales surged 10.1 percent compared to September and 23.5 percent compared to October 2008.

The first-time homebuyer tax credit drove the unexpectedly rosy figures, says the National Association of Realtors. Originally set to expire this month, the U.S. government recently extended the $8,000 tax credit until April 30, 2010, easing concerns about a drop-off in homebuyer activity.

“There is still a large pent-up demand that can be tapped before the tax credit expires,” said Lawrence Yun, the association’s chief economist, in a statement. “Our recent consumer survey further shows that 13 percent of successful first-time buyers had a previous contract that was canceled or fell through — there likely are many more buyers who were attempting to purchase but simply ran out of time.”

Housing inventory at the end of October fell 3.7 percent to 3.57 million resale homes available for sale. That represents a seven-month supply at the current sales pace, a rate not seen since February 2007. That’s down from an eight-month supply in September and may signal a renewing balance between buyers and sellers, the association said. A monthly supply of six months is said to indicate a rough balance between a buyer’s market and a seller’s market. Unsold inventory totals are 14.9 percent below a year ago.

Distressed properties accounted for 30 percent of sales in October. The association said such properties downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.

Almost half, 48.8 percent, of all U.S. home sales were for homes between $100,000 and $250,000. Yun said prices are beginning to flatten, however, and are poised to rise next year.

Sales increases differed widely by region, with the largest gains in the Midwest and the slightest gains in the West. The median resale single-family home price was $173,100 in October, down 6.8 percent from a year ago. Sales of resale homes rose 28.8 percent in the Midwest, 25.7 percent in the South, 27.7 percent in the Northeast, and 12 percent in the West in October compared to the same month last year.

The seasonally adjusted annual rate of resale home sales — which is a measure of a monthly sales rate projected over a 12-month period and adjusted to account for typical seasonal fluctuations in sales activity — jumped 27.7 percent in the Midwest, 24.2 percent in the Northeast, 23.1 in the South, and 11.2 percent in the West year-over-year in October.

The estimated supply of resale homes for sale in October, based on the sales rate for that month, rose 10.1 percent vs. September and 23.5 percent compared to the October 2008 rate, according to the report.