According to a press release from data provider Clear Capital, home prices officially reached double dip territory in April. On average, home prices nationwide are now 0.7 percent below the March 2009 lows, “uncharted territory” per Clear Capital’s Home Data Index. Dr. Alex Villacorta, director of reserach and analytics for Clear Capital Commented:
“The latest data through April shows a continued increase in the proportion of distressed sales that are taking hold in markets nationwide. with more than one-third of national home sales being REO, market prices are being weighed down as many markets have not regained enough footing to withstand the strain of the high proportion of REO sales. In light of the compounding effects of winter’s seasonal slowdown and increased distressed sale activity, the market now faces the true test of whether prices can revound in the historically active spring season.”
National home prices were down 5.0% year-over-year, including a decline of 11.5% over the prior nine months. The main drivers of declining home values are tepid demand for homes coupled with overwhelming unsold supply, as well as the large number of REO homes being sold. An MIT study from last year showed that foreclosure reduced the sale price of a home by about 27% compared to one of the non-distressed variety. A RealtyTrac study from September showed foreclosed homes selling at a 26% discount.
Frankly, this report is unsurprising, as most of the major home price indices have been pointing toward a double dip for the past six months at least. The most recent Case-Shiller report showed the home prices were a “hair’s breadth” from a double dip in February. The broader FHFA Home Price Index saw home price declines accelerating in February, while Radar Logic found that home prices were at an eight year low.
Declining home prices continue to be a millstone around the neck of the recovery, unlikely to be lifted until we see a significant improvement in the employment situation.
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