Single-Family Home Prices Dropped 7.7 Percent From Q1 Of 2007

One out of three the metropolitan areas in the United States showed rising home prices in the first quarter, with only a small number of jumbo loan originations and higher foreclosures resulting in greatly mixed conditions around the country, according to the latest quarterly survey by the National Association of REALTORS®.

In the first quarter, 48 out of 149 metropolitan statistical areas showed higher median existing single-family home prices from a year earlier, 100 had price declines and one was unchanged. NAR’s track of metro area home prices dates back to 1979.

NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said the U.S. market is very dynamic. “It’s more important than ever to examine what’s happening with home prices at the city and neighborhood level,” Gaylord said. “The old real estate mantra of ‘location, location, location’ is perhaps more relevant today than ever before. Consumers should check with REALTORS® for local expertise on what’s going on in their own area because conditions can vary considerably from one neighborhood to the next.”

A proportionately larger slowdown in home sales from a year ago in high-cost markets is continuing to drag down the aggregate national median price. In the first quarter, the median existing single-family home price was $196,300, down 7.7 percent from the first quarter of 2007 when the median price was $212,600. The national median normally is a typical market price, where half of the homes sold for more and half sold for less.

Lawrence Yun, NAR chief economist, said the numbers don’t tell the whole story. “These are highly unusual results because there were very few jumbo loan originations in the latest quarter, so sales are much slower in high-cost areas, and at the same time foreclosures related to subprime mortgages rose,” he said. “Neighborhoods with little subprime exposure are holding on very well, while prices have fallen in neighborhoods with a wide prevalence of subprime loans because more foreclosed properties are being sold at discounted prices.”

Yun pointed out that homeowners with subprime loans account for less than 10 percent of all homeowners. “Even so, subprime mortgages account for more than half of all foreclosures. Sharp price declines are principally in neighborhoods where subprime lending has been widely prevalent,” he said.

The typical seller in the first quarter, who purchased their home six years ago, saw a sizable equity gain despite a price drop from a year ago. The median increase in value for sellers who purchased that home in the first quarter of 2002 is 23.8 percent, and the median home equity accumulation is $37,700.

“The typical home buyer today plans to own that property for 10 years, and with that kind of long-term view most people will do quite well,” Gaylord said. “Inventories have stabilized and mortgage availability is beginning to improve, so we expect overall prices to go positive during the second half of the year.”

In the first quarter, the largest single-family home price increase was the Binghamton, N.Y., area, where the median price of $109,700 rose 11.8 percent from a year ago. Next was Peoria, Ill., at $119,000, up 10.4 percent from the first quarter of 2007, followed by the Spartanburg, S.C., area, where the first-quarter median price increased 10.1 percent to $130,300.

Median first-quarter metro area single-family home prices ranged from a very affordable $65,400 in the Saginaw-Saginaw Township North area of Michigan, to nearly 12 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $780,000. The second most expensive area was San Francisco-Oakland-Fremont, at $701,700, followed by Honolulu at $620,000.

Other affordable markets include the Youngstown-Warren-Boardman area of Ohio and Pennsylvania at $67,700, and Decatur, Ill., with a first-quarter median price of $79,400.

Source: NAR