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The Real Deal Miami

Stabilization of nationwide home prices positive indicator for consumer spending

July 26, 2011 12:47PM

(Source: CoreLogic)

Home prices nationwide began to stabilize in the second half of 2011, a positive indicator for consumer spending, according to a report by CoreLogic released today. In May 2011, excluding distressed sales, the Housing Price Index only dropped 0.4 percent, compared to a decline of 7.4 percent for the Housing Price Index for all transactions. Another positive sign, the report says, is that the Housing Price Index, which even including distressed sales, increased between March and April, for the first time in more than six months, and continued up between April and May.

The positive trend echoed the Standard & Poor’s Case-Shiller U.S. National Home Price Index, also released today, which indicated that U.S. home prices increased month over month in May for the first time in six months.

When median prices are disaggregated by type of sale for the ?rst complete month of the spring homebuying season, CoreLogic reports that despite the impact of the expiration of the federal homebuyer tax credit, state homebuyer tax credits and increases in Federal Housing Administration premiums, non-distressed median existing and new prices are back to 2009 levels.

But median prices for real estate owned property and short sale transactions continued to decline and have fallen 10 percent since 2009, and the incidence and price discount of distressed sales is high, signifying a major impediment to price stabilization, according to the report.

Miami leads the way with a 62 percent REO price discount, followed by Chicago (60 percent) and Detroit (60 percent). West Palm Beach ranked fourth with 58 percent. Still, the current residential shadow inventory, which is the estimated pending supply of distressed properties, declined to 1.7 million units in April 2011, down from 1.9 million homes a year ago and down nearly 20 percent from its peak, according to the report.

Based on that data, CoreLogic projects that the level of distressed sales should begin to decline in late 2011 and into 2012. The report also states that nearly 11 million, or 23 percent, of all residential properties with mortgages were in negative equity at the end of the ?rst quarter of 2011. The negative equity share has been fairly stable over the last year.
Going forward, the report states, negative equity will primarily decline through a combination of foreclosures, amortization and, to a lesser extent, price increases, but it could take eight to 10 years for national prices to reach the previous level .

— Miranda Neubauer