OXFORD — The FNC Residential Price Index (RPI) – the industry’s first hedonic price index built on a comprehensive database combining public records and real-time appraisals – shows that U.S. residential home prices continued to weaken in November, despite modestly rising home sales during the month. After the homebuyer tax credit expired in April, home prices rebounded until July but have declined every month since then.
According to the FNC 30-MSA Composite Index, home prices even fell below significant market lows realized in February – just before a strong housing rebound began as homebuyers rushed to take advantage of the tax benefits. In November, the composite index was 2.4 points, or 1.7 percent, below the February low. The index’s location along the overall boom-and-bust cycle reveals that home prices are currently at levels comparable to those of May/June 2003.
Home prices in the 30 major metropolitan cities declined slightly from October to November at a pace of 0.5 percent. It marks the sixth consecutive month in which the FNC 30-MSA Composite Index has moved lower month-over-month reaching new cyclical lows. Nationwide, home prices were down 0.3 percent from the previous month. Rising slightly by 0.1 percent, the nation’s top 10 housing markets showed modest improvement in November over prior months in terms of the rate of month-over-month price momentum. Although not as significant, similar improving patterns in the rate of month-over-month price changes are indicated by the two broader indices as well.
In terms of year-over-year trends, the two broader indices showed little change from September to November: Home prices in the 30 metropolitan cities remained at about 3.0 percent below the levels attained a year ago; nationwide, they averaged 2.7 percent. Although they experienced similar post-tax-credit setbacks, the top 10 housing markets managed to outperform the broader markets with a much slower pace of year-over-year price declines. From September to November, home prices in the 10-MSA markets were declining only about half as fast (1.6 percent) as the broader 30-MSA markets.
From May to November, home prices in the 30 major metropolitan cities fell 3.8 percent. Nationwide, they were 3.1 percent below the level attained in May. The top 10 housing markets fared slightly better, down 2.9 percent. The chart below shows the post-credit cumulative changes of the composite indices. The patterns present a consistent picture of continued price weakening after the withdrawal of the homebuyer tax credit in April.
Nineteen of the 30 MSAs tracked by the FNC 30-MSA Composite Index experienced downward price movement from October to November that averaged about 1.8 percent. Among the 11 rising markets, the average October-to-November price increase stood at only about 0.7 percent. Notably, the Miami market recently picked up modest price momentum, rising 2.0 percent in November and 1.4 percent in October. This marked the first month of rising home prices since housing began its downturn in summer 2006. On a year-over-year basis, November home prices in 24 of the top 30 markets remained modestly below (6.3 percent, or a median value of 5.2 percent) levels from a year ago.
Among the country’s top housing markets, Phoenix, Las Vegas, Orlando, Atlanta and Chicago continue to experience rapid year-over-year declines in the double digits of 16.3 percent, 15.9 percent, 14.7 percent, 11.3 percent and 11.1 percent, respectively, followed by Tampa, FL, (9.2 percent) and Portland, Ore. (8.3 percent). The conditions in these markets remain essentially unimproved in recent months. On the other hand, the Los Angeles, San Francisco, San Diego and Denver markets continue to show robust recovery with November home prices rising year-over-year by 10.1 percent, 8.4 percent, 6.2 percent and 1.7 percent, respectively. Despite experiencing some post-credit pullback, the three California markets have managed to outperform the broader market in maintaining the strong growth momentum sparked by the tax stimulus. After nearly nine months of positive year-over-year growth, home prices in these markets have rebounded to levels comparable to early 2009.
The recent broad declines in home prices are a reminder that conditions in the single-family housing market remain unfavorable for the near-term. Building permits, often seen as one of the most identifiable indicators of market improvement, continue to decline rapidly at about 9.3 percent per month in the last three months while also approaching new cyclical lows. Sales of new and existing homes continue to hover around their cyclical lows, with November sales falling significantly below (21.2 percent and 27.9 percent, respectively) levels realized a year ago. The sales of foreclosed homes as a percentage of total home sales have increased in recent months and accounted for about a third of November sales. The continued sale of REO properties, combined with high unemployment and slow economic growth, indicate home prices are likely to keep weakening in the coming months.