November Home Price Index Shows Further Decline, Slowed Recovery According to Newly Released First American CoreLogic Data

Home Prices Continue to Depreciate

Date: 01/21/2010

National home prices, including distressed sales, declined by 5.7 percent in November 2009 compared to November 2008, according to First American CoreLogic and its LoanPerformance Home Price Index (HPI). This was an improvement over October’s year-over-year price decline of 7.6 percent.* On a month-over-month basis, however, national home prices declined by 0.2 percent in November 2009 compared to October 2009.

Excluding distressed sales, year-over-year prices declined in November by 5.1 percent (in October non-distressed sales fell by 5.7 percent year-over-year). This underscores the negative impact that distressed sales have on the HPI, as distressed sales continue to decline at a larger annual rate than non-distressed sales.

Forecast is for Further Declines
The forecast for most markets became more pessimistic in November 2009. First American CoreLogic is projecting further declines followed by a recovery in the spring; however, the recovery is now projected to be smaller in magnitude and to occur later than previous forecasts indicated. Nationally, the HPI is expected to be down 0.23 percent, excluding distressed sales (up 2.94 percent including distressed sales) by November 2010. For the top 45 largest CBSAs, HPIs are projected to rise an average of only one percent through November 2010, with the bottom in most markets being reached in April or May of 2010. This is a consequence of continued recent downturns in most HPIs, as well as expectations of persistently high unemployment, foreclosures and higher interest rates in 2010.

National HPI Highlights as of November 2009

• Including distressed transactions, the HPI has fallen 30.0 percent nationally through November from its peak in April 2006. Excluding distressed properties, the national HPI has fallen 21.8 percent from the same peak.
• When distressed sales were included Nevada (-22.5 percent) remained the top-ranked state for annual price depreciation followed by Arizona (-14.9 percent), Florida (-13.7 percent), Michigan (-12.6 percent) and Idaho (-11.0 percent). All of these states also showed month-over-month decreases in their HPI.
• Excluding distressed sales, the worst five states for year-over-year price declines changes slightly. Nevada (-19.7 percent) still holds the top spot, followed by Arizona (-14.1 percent), Florida (-12.3 percent), Michigan (-10.6 percent) and West Virginia (-9.6 percent).
• Regardless of whether distressed transactions are included or excluded, the markets that are expected to experience the largest year-over-year declines are in the traditional industrial centers of the Midwest and Great Lakes that have been hit hardest by the current recession. Leading the list are four Michigan markets: Detroit (-13.1 percent), Sault Ste. Marie (-11.0 percent), Saginaw (-9.7 percent) and Kalamazoo (-7.8 percent).
• The hard-hit markets of the Sun Belt are also predicted to hit their true bottom in the next 12 months, as evidenced by a substantially smaller rate in their projected price declines relative to the pace of decline in 2009. Select markets include: Las Vegas (-6.5 percent), Phoenix (-3.3 percent), Reno (-3.3 percent) and Orlando (-2.5 percent).

"On average, we are expecting home prices to turn around next spring," said Mark Fleming, chief economist for First American CoreLogic. "While the share of REO sales are down, allowing price declines to moderate, there is concern moving forward with the levels of shadow inventory, negative equity, and the ability of modification programs to mitigate this risk," he said.

Read more: January 2010 HPI Media Alert