Housing Prices Level Off in April

U.S. housing prices leveled off in April, reversing 10 straight months of declines as low mortgage rates and a first-time homebuyer tax credit lured buyers back into the market.

The report, by national foreclosure management company Integrated Asset Services, LLC, said that median sales prices on U.S. homes rose a fraction of a percent in April. More importantly, it said that the volatility of the market was less than last year, indication that pricing trends are flattening out and the market is becoming more settled.

"It's too soon to call this a turn in the housing market, particularly given all the political and regulatory uncertainties," said Dave McCarthy, president and CEO of Integrated Asset Services. "I think that we're still in for some difficult spells ahead, but we are seeing a certain kind of pricing equilibrium in several important markets. That's encouraging for the long term."

Median housing prices still remain 13 percent below their April 2008 market and down more than 19 percent from the peak of the market in June 2007. The IAS survey is the latest of several indicators that have shown that housing prices are beginning to stabilize after several months of steep declines following the collapse of the subprime mortgage market last fall.

Could make loan modifications easier to obtain

That may eventually turn out to be good news for some homeowners seeking to refinance their homes or obtain loan modifications, even as mortgage refinance rates have risen, as lenders gain confidence in the durability of home values.

Helping to flatten out the decline in housing prices has been increased interest from investors, who buying up distressed properties by the fistful in various markets. Foreign investors have been reported to be buying up homes in the severely depressed Detroit market in lots of 10, 50, even 100 homes at a time, while in southern California, many short sellers are reportedly attracting multiple bidders who are driving up sales prices well above the original asking price.

Individual buyers coming back into market

Individual buyers have also played a role, as low interest rates and prices, along with an $8,000 tax credit for first-time buyers, as persons with stable incomes are finding good opportunities to buy their first home or move up to a nicer property. At the same time, a flood of foreclosures continues to exert downward pressure on housing prices and will likely be a drag on the market for some time to come.

"Inventory levels are definitely declining and the number of sales and pending sales are both increasing," said Rick Foos, President of SRA Foos & Associates, Inc. "This is primarily in the lower price areas where the incentives appear to be having an impact, along with low interest rates, but it is also having a positive effect psychologically on the entire market."

However, Foos said the trend could be reversed if interest rates continue to rise and there is a significant increase in foreclosures. If they hit together, he said, the current trend could be a "false bottom" to the housing market. If not, he said, it appears the market has probably bottomed out.