FNC: Home prices fell, but not as far as expected
OXFORD — FNC announced that U.S. home prices weakened only slightly in February, a better-than-expected price seasonality.
Based on the latest data on non-distressed home sales (existing and new homes), FNC’s Residential Price Index (RPI) indicated that home prices in February declined 0.7 percent from January, or 5.3 percent, from a year ago. Contrary to expectations of relatively rapid price deteriorations, February delivered instead the slowest one-month price declines since November. Even so, the trend shows that weak housing demand and spillovers from rising distressed sales continue to affect the mortgage market.
FNC’s RPI also showed home prices nationwide are currently 1.9 percent below the end of 2010 and comparable to May 2003 on a cyclical basis.
All three composite price indices (the national, the 30-MSA, and the 10-MSA indices) showed relatively flat one-month price changes, ranging from -0.7 percent by the national composite to +0.3 percent by the 10-MSA composite. Compared to the previous three months, February is seeing improved trends relative to the pace at which home prices are weakening. Within the 30-MSA composite index, home prices declined in 21 markets at an average rate of 1.6 percent. In comparison, among the 26 MSAs that showed falling prices in January, the average rate of decline was about 2.4 percent.
Normally, home prices in February tend to exhibit relatively large seasonal price movement. The better-than-expected February price seasonality could likely send early signals that the housing market is ready for a gradual rebound as a seasonal uptrend in spring home buying typically occurs. The latest published data on existing home sales shows that sales of existing homes are increasing modestly. The latest data on foreclosure price discounts also reveal improving trends in price discounts on distressed homes sales.
Not all markets showed improving trends. Conditions in several major housing markets continue to drive prices lower — home prices in St. Louis, Atlanta, Tampa, Charlotte, and Orlando have lost 5.0 percent or more value since the start of 2011. San Antonio, Minneapolis, Washington, D.C., and Phoenix also showed modest two-month cumulative declines of 4.0 percent, 3.8 percent, 3.8 percent and 3.6 percent, respectively. Meanwhile, Boston, Cleveland, Denver, Detroit, Nashville, and Pittsburgh made small to modest gains in the last two months, ranging from 0.2 percent in Boston to 2.3 percent in Pittsburgh.
Home prices continue to fall in double digits below the levels seen a year ago in Phoenix (15.7 percent), Atlanta (14.1 percent), Orlando (13.5 percent), Sacramento (11.3 percent), Portland (11.2 percent), Las Vegas (11 percent), Charlotte (11 percent), and Chicago (10.3 percent), followed by high single-digit declines in Tampa (9.8 percent), St. Louis (9.4 percent), Minneapolis (8.1 percent), San Antonio (7.7 percent), and Miami (7.1 percent). In particular, the steady declines in recent months in St. Louis and San Antonio came after the two markets displayed rather robust home prices, despite the 2007 housing collapse. (Home prices in St. Louis rose 7.7 percent from July 2007 to July 2010; San Antonio measured a 7.0 percent price gain from July 2006 to July 2010. In contrast, the 30-MSA composite showed a 29.5 percent decline between July 2006 and July 2010 and a 28.8 percent decline between July 2007 and July 2010.)
Of the markets tracked by the FNC 30-MSA Composite Price Index, only Detroit and Los Angeles show positive year-over-year price growth since January 2011 — 2.9 percent in Detroit and 1.2 percent in Los Angeles. While markets including Denver, San Diego, and San Francisco showed extended year-over-year growth as recent as October/November, recovery in these markets — driven by the homebuyer tax credits — has largely faltered in recent months and home prices are approaching new cyclical lows.
The near-term outlook for the housing market largely remains subdued. Within the housing sector, continued price dampening from rising distressed sales are expected, although the upside it brings is excess inventory reduction as well as improved consumer perceptions and confidence about the market returning to normalcy, all of which are ingredients for a more sustainable recovery ahead. Meanwhile, demand for housing is expected to remain weak. Continued high unemployment and uncertainty about the labor market prospects amid a marked slowdown in overall economic activities will continue to keep many potential homebuyers from investing in homes.
Source: FNC Inc.
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