The Wall Street Journal

10 November  2011

U.S. home prices fell in nearly three-quarters of metropolitan areas in the third quarter and the national median price dropped 4.7% as the housing market continued to show weakness.

The median price for previously occupied homes sold in the July-to-September quarter declined when compared with last year in 111 out of 150 metro areas tracked by the National Association of Realtors, the trade group said Wednesday. Prices rose in 39 metro areas.

The results were roughly even with the second quarter, in which median prices fell in 109 out of 151 cities tracked by the real estate trade association. The national median price for single-family homes sold in the third quarter fell to $169,500 from the same quarter a year earlier.

With the economy weak and many Americans reluctant to commit to a home purchase, the housing market has been slow to recover from the worst downtown in decades. The Realtors’ group said last month that the number of people who signed contracts to purchase previously occupied homes in the U.S. sank in September to the lowest level in five months.

The Realtors’ latest report showed sales of homes in the third quarter were up 17% from a year earlier, a period in which sales dropped off due to the expiration of a federal tax credit. They were down 0.1% from the second quarter.

“Home sales need to recover first, only then can prices stabilize,” said Lawrence Yun, the Realtors’ chief economist, in a statement.

The metro areas showing the biggest decline in median prices from a year earlier were Mobile, Ala. (-17.7%), Phoenix (-17.6%), Allentown, Pa. (-17.5%) and Salt Lake City (-15.3%). Areas where prices rose included Grand Rapids, Mich. (23.7%), South Bend, Ind. (19.8%), Palm Bay-Melbourne, Fla. (17.7%) and Youngstown, Ohio (13.1%).

Paul Dales, senior U.S. economist at Capital Economics, forecasts that U.S. home prices will fall a further 3% by the end of this year, due to weak demand, a poor economy and a high supply of foreclosures and other distressed properties on the market. It will take “years rather than months for a proper recovery to get going,” said Mr. Dales, who predicts home prices nationally won’t mount a sustained rise until 2014.

Nationwide, “distressed property,” including foreclosures and homes at risk of foreclosure, accounted for 30% of third-quarter transactions, down from 33% in the second quarter, the Realtors’ group estimated.