Home Prices Fall in Over Half of States for 2nd Quarter

The housing market is showing no signs of improvement as high unemployment and tough lending standards prevent many from buying a home.

Mortgage applications fell 2.4% last week, according to a report released by the Mortgage Bankers Association on Wednesday. Very few applications were for the purchase of a new home - 79.8% of all applications were from borrowers who wanted to take advantage of low mortgage interest rates and refinance the loan on their current home.

“Another week of volatile markets and rampant uncertainty regarding the economy kept prospective homebuyers on the sidelines, with purchase applications falling to a 15-year low,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.

Fratantoni also said that refinance application volume fell slightly due to the increase in mortgage rates. The rate for a 30 year fixed rate conventional mortgage with a 20% down payment rose from 4.32% the previous week to 4.39%.

With rising fears of another recession, many prospective homebuyers are just waiting for home prices to fall further before they commit to the purchase of a home.

Home prices fell .6% in the second quarter despite an increase of .9% for the month of June from the previous month, the Federal Housing Finance Agency reported on Wednesday. Over the past four quarters, home values have dropped 5.9% across the nation while inflation of other goods and services have increased 4.5% - accordingly, the inflation-adjusted home price has fallen roughly 10% over the year. Home ownership has traditionally been deemed a smart way to insure one’s investment’s keep up with inflation - but not in this economy.

Thirty-one states experienced a decline in home prices from the first quarter to the second quarter. Over-the-year, only Washington, DC and two other states had housing price increases. Washington’s home values seem impervious to the ongoing housing disaster - housing prices rose 7.15% over the quarter and 12.13% over the year.

North Dakota had the next largest increase in home prices, up by 3.9% over-the-year. This state was also virtually bypassed by the economic downturn - it’s June unemployment rate of 3.2% is already back to pre-recession levels. Oklahoma was the only other state to experience an over-the-year rise in home prices - up .3% for the quarter and up 4.1% for the year.

Bismark, ND ranked as the number one city in the nation for home price appreciation - up 6.09% since the same time last year.

Of the 25 largest metropolitan areas in the U.S., Pittsburgh, PA was the only city to experience home price appreciation - up 3.7% over the year. The largest decline in big city home prices was in Atlanta, GA - which recorded a 14.1% drop.

While inventory of new homes for sale fell to a 48 year record low last month, sales of new homes held fairly steady in July, slipping by just .7%, according to figures from the Commerce Department.

Bob Nielsen, National Association of Home Builders chairman and a home builder from Reno, Nevada said that the less than one percent dip show just how little conditions the housing market has changed.

Nielsen said, "While new-home inventories are exceptionally thin, home builders are still competing with large numbers of foreclosed and distressed homes on the market and a climate of uncertainty in which consumers are reluctant to go forward with a major purchase for fear of what economic news tomorrow might bring."

Putting this situation into perspective, said NAHB Chief Economist David Crowe, "The current nationwide inventory of completed new homes ready for occupancy – at 61,000 units – is in keeping with what a single major metropolitan area such as Atlanta might sell in a typical year."

On Tuesday, the National Association of Realtors urged the White House to host a summit with policy makers, industry leaders and government stake holders focused on revitalizing the nation’s housing.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, RI said, “Housing and home ownership issues affect all Americans, which is why we need strong policies that will help stabilize the housing market and lead the way out of today’s economic struggles.”





Sources:
National Association of Home Builders
Mortgage Bankers Association
National Association Realtors
Federal Home Finance Agency