Foreclosures, Short Sales Send Housing Prices Down

Foreclosures and short sales made up nearly half of all existing single-family home sales in the first three months of 2009, as housing prices recorded their biggest annual decline on record.

The National Association of Realtors quarterly survey reported that the median sales price of existing single family homes in the first quarter of 2009 was $169,000, down nearly 14 percent from one year before. The decline is the biggest annual percentage drop since the NAR has been tracking the data.

The NAR said nearly half of all purchases were first-time homeowners, many looking for bargains on distressed properties. Distressed homes typically sell for 20 percent less than other properties, helping skew the sales results downward.

First-time homeowners seek bargains

Seasonally adjusted total sales also were down on both a seasonal and quarterly basis. The NAR reported that total sales of single-family homes, condos and co-ops were 4.59 million units in the first quarter of the year, down 3.2 percent from 4.72 million in the last quarter of 2009 and 6.8 percent from one year before, when 4.93 million units were sold.

The data was a dark spot among what has been a number of hopeful signs that the housing market may be nearing its bottom. Mortgage applications have been unusually strong in the first four months of 2009, driven in large part by refinancing, and low interest rates, bargain prices and an $8,000 tax credit have increasingly drawn interest from first-time buyers.

At the same time, the monthly decline in home prices has slowed the past three months, according to the NAR, from 18 percent in January to 12 percent in March. The NAR reported last week that its index of pending sales, an indicator of future activity, actually rose slightly in March.

Signs of hope

"I do think we have some early signs that the market overall is stabilizing," said Shaun Donovan, Secretary of the Department of Housing and Urban Development, addressing an NAR meeting today in Washington. "Since January we've seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate."

There are some signs that the supply of available homes may be tightening as well. The Real estate data tracking company ZipRealty reported today that April listings of homes for sale were down 3.8 percent from the month before, at a time when listings are normally rising with the onset of the spring sales season. Compared with April 2008, listings in the survey are down 21 percent.

Foreclosures a wild card

That would normally exert an upward pressure on home prices, but foreclosures remain the big question mark in the housing market. According to the Wall Street Journal, banks may be holding anywhere from 40 percent to 65 percent of their foreclosed home stock off the market at any given time.

The Federal Deposit Insurance Corporation reports that U.S. Banks held $26.6 billion of repossessed real estate at the end of last year, approximately twice as much as at the end of 2007. Many major banks also imposed a voluntary moratorium on foreclosures during the first two months of this year, so it is uncertain