Prices for single-family and condominium homes in the second quarter fell by a record 15.6% and 19.8% year-over-year in the United States, mainly due to foreclosures.
While the data taken on a national average may be disheartening, the highly fragmented, or "hyper-local" U.S. housing market does show signs of hope. But any recovery for the country as a whole will proceed very slowly.
A bulk of the lower home prices – 36%, to be exact – were the result of distressed home sales, the National Association of Realtors (NAR) said yesterday (Wednesday). Distressed home sales, which are defined as either a foreclosure or short sale, are typically carried out at a 15% to 20% discount to a house's original value.
"I don't think we're at a bottom yet in home prices," said Scott Anderson, a senior economist at Wells Fargo & Co. told Bloomberg News. "There's also a pretty big shadow supply of houses. People are kind of waiting for the bottom but there's a pent-up supply out there."
Existing home sales, which include single-family homes and condominiums, continued to slide as well, falling 2.9% to 4.76 million units. That compares 4.9 million units sold in the second quarter of 2008. However, sales rose a seasonally adjusted 3.8% when compared to the first quarter, the NAR said.
Still, it won't be easy to lure potential homebuyers off the sidelines. While job losses lessened in July, the unemployment rate remains historically high, and will likely press above 10% by the end of the year. Meanwhile, mortgages rates have experienced a steady rise since hitting a record low of 4.78% in April.
The average contract interest rate for a 30-year fixed-rate mortgage rose to 5.38% in the week ended August 7, up from 5.17% the week prior, according to the Mortgage Bankers Association (MBA). Mortgage application volume decreased 3.5% on a seasonally adjusted basis from one week earlier, as a result.
"This is really a lousy market," Patrick Newport, an economist with IHS Global Insight told The Washington Post. "The sales are growing in part because prices are dropping, but the sales are still near all-time lows."
Of course, there was some good news in the NAR data. First-time buyers accounted for one-third of sales in the quarter, driven by the Obama administration's $8,000 tax credit that can be used up front for a down payment. The opportunity for consumers to take advantage of the credit is good until Nov. 30, but Senate Majority Leader Harry Reid, D-Nev., told Nevada reporters in a conference call that an extension of the bipartisan-backed program is likely, the Las Vegas Sun reported.
Nine states saw sales gains in both quarter-to-quarter and annual categories. Nevada, with its rock-bottom prices saw the biggest gain from 2008 with an increase of 76.8%.
News and Related Story Links:
- Money Morning:
"Hyper-local" Stats Show Housing Market Has Bottomed
- National Association of Realtors:
2nd Quarter Existing-Home Sales Rise in Most States, Helped by Affordable Metro Prices
- Bloomberg News:
Home Price Declines Accelerate in Second Quarter
- Money Morning:
Record Low Mortgage Rates Spurring Refinancing and Borrowing
- Mortgage Bankers Association:
Mortgage Applications Decrease as Rate Jump Suppresses Refinance Activity in Latest MBA Weekly Survey
- The Washington Post:
Home Sales Surge, Raising Hope That Sector Is Recovering
- Las Vegas Sun:
Reid: Congress Will Extend $8,000 Home Tax Credit
- Money Morning:
Has the Housing Market Really Hit Bottom, or Is It Headed for Another Collapse?