Slowing Decline in Home Prices Seen

By:: Kirk Haverkamp | June 09, 2011

Declines in home prices slowed over the most recent quarterly period, with the arrival of the spring buying season driving stronger sales activity.

The real estate data firm Clear Capital reported today that national home prices declined 2.3 percent over the most recent quarter, less than half of the 4.9 percent quarterly decline reported last month. The company uses a “rolling quarter” format that provides updated reports every month.

Growing signs of price stabilization had been expected, as sales activity nearly always increases with the arrival of the spring and summer buying seasons. Even during the worst years of the recent downturn, spring sales have always exceeded those of the preceding winter, increasing by an average of 14 percent, according to Clear Capital.

“The latest Market Report results through May suggest that home prices are starting to ease back from the heavy declines seen over the winter,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital. “We are still far away from the strong demand needed to fully turn things around for the housing market; however, it is clear from the initial spring sales data that prices are softening, suggesting stabilization in the market.

Another favorable indicator, according to Villacorta, is that the market share represented by foreclosed and other distressed properties appears to have stabilized, after rising by 10 percent since last summer. In addition, median sales prices for real-estate owned (REO, the industry term for foreclosed properties) have risen over the previous three quarters, suggesting increased demand for higher-priced REOs.

Through the fourth quarter of 2010, median prices on distressed properties had risen by 5 percent, according to Clear Capital. The company calculates that distressed properties presently make up just over one-third of all home sales.

Other indicators in the current report were not so encouraging. Many metropolitan areas continued to show double-digit price declines from one year ago, while very few showed any kind of annual increase. Two of the bright spots were the Washington, D.C. and New York City regions, which showed annual gains of 4.9 percent and 1.4 percent, respectively. Nearly all other metro areas continued to show annual price declines.

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