Nondistressed Home Prices Stabilizing

By:: Peter King | June 30, 2011

U.S. home prices rose for a second consecutive month in May, rising 0.8 percent as the spring homebuying season gets into full swing.

May’s increase followed a 1.3 percent gain in April, which broke a string of nine consecutive monthly declines. For the year, prices are down 7.42 percent since May 2010.

That’s a bigger annual decline than the 6.7 percent drop recorded from April 2010-11. Typically, an accelerating rate of annual price declines indicates a weakening housing market. However, that decline was driven almost entirely by sales of distressed properties such as foreclosures and short sales. For nondistressed home sales, prices were down only 0.4 percent over the past year, compared to a 0.8 percent annual decline in April, reflecting slowing price declines for regular home sales.

“Two consecutive months of month-over-month growth and continued relative strength in the non-distressed market segment are positive seasonal signs in the housing market,” said Mark Fleming, CoreLogic chief economist. “Slowly declining shadow inventory and stabilized negative equity levels are also positive signs. Nonetheless, the fragile economic recovery is still critical to the long-term recovery in the housing market.”

The figures are not seasonally adjusted, however, so it is unclear how much of a boost came from the normal arrival of the spring buying season, which tends to push up prices.

On an annual basis, home prices fell in all but eight states over the last 12 months. Excluding distressed sales, however, prices rose in nearly half – 24 states. States showing the biggest price increases in nondistressed sales were West Virginia (up 10.1 percent), Hawaii (+9.0 percent), North Dakota (+8.6 percent), Vermont (+6.3 percent) and New York (+6.1 percent).

The states with the biggest price declines in nondistressed sales were Nevada (down 9.8 percent), Idaho (-7.9 percent), Arizona (-7.0 percent), South Dakota (-6.1 percent) and Minnesota (-5.0 percent).

The CoreLogic monthly home price index is based on repeat sales of individual properties in more than 6,500 zip codes, covering 58 percent of the U.S. population.

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