September 8, 2009
House prices in the U.S. continued to depreciate in the second quarter 2009 but at a much more moderate rate compared to the fourth quarter 2008, the peak of the collapse in home prices, according to a quarterly housing valuation analysis by IHS Global Insight. Prices fell at a 2.7% annualized rate in the second quarter 2009, compared to 2.1% in the first quarter and a 12.5% rate of decline in the fourth quarter 2008, according to the new House Prices in America, the quarterly U.S. housing valuation analysis from IHS Global Insight, one of the world’s leading companies for economic and financial analysis and forecasting. Nationally, house prices have fallen 11.0%, on average, below their peak in the spring of 2007; when weighted by market value, the nation is now 11.1% undervalued, and 12.6% undervalued when weighted by housing units.
Prices declined in slightly more than one-third– 113 metros– of the 330 metropolitan areas in the study, down from 191 areas in decline in the first quarter, and down sharply from 317 areas registering declines in the fourth quarter of 2008.
The second quarter data from the Federal Housing Finance Agency (FHFA) may represent the bottom of the cycle, said James Diffley, group managing director of IHS Global Insight’s Regional Services Group, “though it is too early to tell for certain, and the waves of foreclosures and short sales may be obscuring the underlying trend.”
“Economic conditions remain dire and the federal tax credit for first-time homebuyers expires at the end of the year,” said Jeannine Cataldi, senior economist and manager of IHS Global Insight’s Regional Real Estate Service. “But available monthly data since May 2009 suggest that the broad decline has ceased.”
Metro areas in California, Florida, and Nevada, states that experienced the highest levels of overvaluation as the housing bubble expanded, and Michigan, which has been hit hard by the recession and cutbacks in the auto industry, have experienced the greatest declines. More than one-third of the nation’s metro areas– 127– have seen prices decline by more than 10%, and nine have seen prices drop by more than 50%, with Merced, Calif., experiencing price declines of 65% off their peak. The largest second quarter home price decline was 6.1%, in St. George, Utah.
Only 16 metro areas, most in the middle of the country and six in Texas, have escaped net home declines during this cycle. Extreme home price overvaluation is essentially nonexistent. Only Atlantic City, N.J., remained extremely overvalued, in stark contrast to 2005 when 52 metro areas, fully one-sixth of the nation’s metropolitan areas, were extremely overvalued.