Home Prices in U.S. Drop Most on Record in Quarter

May 12 (Bloomberg) — Home prices in the U.S. dropped the most on record in the first quarter from a year earlier as banks sold seized homes and foreclosures in California and Florida dominated sales.

The median price fell 14 percent to $169,000, the National Association of Realtors said today. Prices dropped in 134 of 152 metropolitan areas, with the deepest declines in Cape Coral-Ft. Myers, Florida, and the San Francisco and San Jose areas.

Distressed sales increased transactions in 17 states from the fourth quarter as speculators and first-time buyers purchased bank-owned properties. Such homes typically sold for 20 percent less than others, the NAR said today. The inventory of previously owned homes on the market dropped to 3.7 million in March from 3.8 million a month earlier, according to NAR data. The number of new homes for sale fell to 311,000, the lowest since January 2002, according to the Commerce Department.

“We are very much in a bifurcated market with sharp differences between foreclosures and short sales on one hand, and traditional homes on the other,” Lawrence Yun, the NAR’s chief economist, said in a statement.

Total existing home sales fell 6.8 percent from a year earlier to a seasonally adjusted annual rate of 4.59 million units, the group said. Sales were down 3.2 percent from the fourth quarter. The figures include single family homes and condominiums and co-ops.

‘Split Market’

Some areas showed “dramatic” drops in home prices, Yun said.

“In areas with the biggest price declines, we also see much higher levels of distressed sales which are distorting the data,” he said.

The steepest price decline was in Cape Coral-Fort Myers, down 59 percent from a year ago, followed by Saginaw, Michigan, with a 54 percent drop. The next biggest decreases were Akron, Ohio, with a 48 percent decline, San Francisco, down 43 percent, and San Jose, California, with a 42 percent drop.

The largest sales gain from a year ago was in Nevada, up 117 percent, followed by California which rose 81 percent, Arizona, up 50 percent, and Florida with a 25 percent increase.

Those four states accounted for the 26 highest foreclosure rates in the first quarter among U.S. cities with a population of 200,000 or more, according to RealtyTrac Inc., an Irvine, California-based seller of real estate data.

Slowing Declines

While the quarterly drop in prices set a record, the declines slowed in each of the three months. The U.S. median home price dropped 12 percent in March compared with a year earlier, according to NAR. That was slower than the 14 percent decline in February and the 18 percent slide in January.

U.S. banks held $26.6 billion of repossessed real estate at the end of 2008, more than doubling from a year earlier, according to the Federal Deposit Insurance Corp. in Washington. The banking industry lost $26.2 billion in the fourth quarter, the largest loss in FDIC records.

The average U.S. rate for a 30-year fixed mortgage was 4.84 percent last week, down from 6.05 percent a year earlier, according to mortgage buyer Freddie Mac. The rate fell to a record low of 4.78 percent last month.

On an annual basis, the fixed rate will probably average 5 percent this year and 5.3 percent in 2010, according to a forecast posted on NAR’s Web site. Last year, the rate was 6.1 percent.

Sales of existing homes likely will reach 4.97 million in 2009, up from last 4.91 million year, according to the Realtors’ forecast.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

Last Updated: May 12, 2009 10:48 EDT
By Kathleen M. Howley

Source: Bloomberg

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