House Prices Still Falling

While the economy picked up the second half of this year, the housing market hasn’t participated. Home prices continued to fall in October, though sales of existing homes picked up and homebuilders applied for more permits. Though prices stabilized a bit during the summer, they fell at a 7.5% annual rate in the third quarter, according to data from CoreLogic.

Fall is usually a slow period for real estate, but it’s more pronounced now that foreclosure activity has begun to rise again after falling subsequent to the robo-signing scandal. Lenders are filling their foreclosure pipelines again, and distressed sales are the biggest single factor in home price action these days. When CoreLogic factors out the distressed sales, home prices in October rose 0.9 percent from September and were only a half percent lower than October 2010.

Of course, homeowners trying to sell can’t rejoice in this because they can’t factor out the distressed properties. Appraisers and buyers are considering foreclosure properties in their market analysis and home valuation. Coupling appraisal difficulties with mortgage issues, the National Association of Realtors® reports that cancelled home sales jumped to 33% in October from 18 percent in September. That’s up from 8% a year ago.

Many would-be sellers aren’t listing their homes due to being under water on their mortgages, which actually helps to hold up prices a bit. However, when they can’t sell, they can’t buy either, so this keeps buying pressure down as well. Last month, the National Association of Realtors reported that the national median home price was $169,500 in the third quarter, down 4.7% from the same period a year ago.