FNC: U.S. home prices fell despite strong sales

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Published: October 23,2011

Tags: home prices, home sales, homes, houses, real estate, residential

OXFORD — FNC Inc.’s latest Residential Price Index indicates U.S. home prices declined in August despite strong existing home sales during the month.

This decline reverses a modest fourth-month long seasonal uptrend.

Amid weak economic fundamentals, home prices — as well as a number of key leading housing indicators including new housing starts and building permits — signal a likely scenario of continued housing weakness in the months ahead.

Based on the latest data on non-distressed home sales (existing and new homes), FNC’s Residential Price Index (RPI) indicates that single-family home prices fell in August to a seasonally unadjusted rate of 0.8 percent. As a gauge of underlying home value, the RPI excludes sales of foreclosed homes, which are often sold with large price discounts due to poor property conditions.

Modest price weakening, as indicated by the index’s month-over-month movement, is seen across all three RPI composites (the National, 30-MSA, and 10-MSA indices). On a year-over-year basis, home prices are 4-5 percent below the levels attained a year ago in August 2010.

Among the metro areas tracked by the FNC 30-MSA composite index, the majority of these markets showed modest price declines in August, including Boston (-1.2 percent), Miami (-1.6 percent), Minneapolis (-2.8 percent), Phoenix (-2.2 percent), Portland (-3.0 percent), Los Angeles (-1.1 percent), San Diego (-1.2 percent), San Francisco (-1.4 percent), Tampa (-2.2 percent) and Washington D.C. (-2.7 percent). Among the limited few that continued to capture positive seasonal momentum through August, Chicago had one of the largest price increases during the month, up 2.8 percent from July. More notably, as the auto industry remains one of the few growth spots in the economy, home prices in the Detroit metro area continue to strengthen — making August the fifth month of continually rising home prices.

Year to date, Boston, Dallas, Detroit, Houston, Minneapolis, and San Francisco are among those that showed the best price appreciation after a strong seasonal rebound, up 4.0 percent, 3.4 percent, 4.2 percent, 5.6 percent, 3.7 percent and 4.4 percent, respectively. Having largely missed meaningful seasonal growth, the troubled Las Vegas, Miami, and Orlando markets were down 6.8 percent, 5.8 percent and 5.3 percent, respectively, year-to-date.

Year over year, Atlanta, Las Vegas, and Orlando continue to lead the nation in annual price depreciation, down 10.8 percent, 11.8 percent and 14.2 percent, respectively. Detroit remains the bright spot for home price appreciation. Home prices in the city have appreciated more than 7.8 percent since a year ago. The only two other cities that showed positive annual price appreciation are Boston and Houston, where home prices have appreciated 2.2 percent and 1.0 percent in the last 12 months.

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