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Wednesday, May 11, 2011

Foreclosures Crush Home Prices...Down 30% Plus"

Foreclosures crush home prices
By Les Christie, staff writer May 10, 2011: 5:01 PM ET

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NEW YORK (CNNMoney) -- Home prices continued to plummet during the first three months of 2011, falling 4.6% from a year earlier.

The U.S. median price, according to the National Association of Realtors (NAR), dropped to $158,700 for a single family house. Condo prices fell even harder -- 10.4% to $152,900.

0Email Print The median home price has now slumped 30% from its 2006 high of $227,100, and prices have fallen nearly 7% so far this year.

"We're seeing prices dropping faster than they did in 2010," said Pat Newport, an analyst with IHS Global Insight. "That's troubling. Falling home prices precipitated the recession and are slowing the recovery."

NAR blamed much of the latest price drop on sales of foreclosed properties. These "distressed" property sales accounted for 39% of the market, up from 36% from a year earlier.

Distressed properties, often in poor condition and are priced to move, sell for about 20% less than conventional home sales.

Those sales attract speculators, investors and cash buyers who gravitate toward lower priced homes, said Lawrence Yun, chief economist for NAR. (How to buy a foreclosure)

The market for distressed properties may further expand over the next few months. Falling prices have sent more mortgage borrowers underwater, owing more on their mortgage balances than their homes are worth. That makes them more likely to default on loans.

"That's a key problem," said Newport. "There are a lot of bad loans in the foreclosure pipeline and we don't know how many strategic defaults [people walking away from their mortgages] will result."

Of the 153 home markets covered by the report, Honolulu recorded the highest median price, $579,300. San Jose, Calif., the heart of Silicon Valley, was second at $545,000, and Anaheim-Santa Ana, Calif. was third at $511,800.

The lowest priced markets were in the Rust-Belt: Youngstown, Ohio ($55,400); Lansing, Mich. ($64,400); and Toledo, Ohio ($64,900).

The biggest losers were Gulfport, Miss. (down 22.8% to $99,400); Akron, Ohio (off 21.4% to $74,900); and Salem, Ore.(down 20.6% to $153,500).

Check out prices in your home town