What If There Weren't All Those Foreclosures?
What would your home be worth if there weren't all those foreclosure sales on the market, dragging down prices? It's a natural question for any homeowner who is not in default, not upside down on their mortgage and not willing to sell at a desperation price.
The bad news is your value would still likely be down a lot from the peak of the market.
Distressed home-sales--foreclosures and short sales--magnified the price decline in California since 2006 by about 5.4 percentage points, according to a new research paper from the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac. The study, by Andrew Leventis at FHFA, attempts to quantify the effect of distressed home sales on home price measures such as FHFA's House Price Index, and it focuses on one of the states hardest-hit by foreclosures.
We're not all in California, of course. Nor are we all living in a foreclosure hotspot within the metropolitan Washington area. If you live in a neighborhood with foreclosures dotting every other block, those distressed prices will have a greater effect on your own home's value than they would if you live in one of the Washington-area neighborhoods where buyers are still competing to get at a limited supply of highly desirable homes.
Even adjusting for the 5.4 percent difference, FHFA said non-distressed home sales had roughly a 36 percent price decline since the market's peak in 2006. When you include distressed sales in the mix, values fell about 41 percent.
A bunch of decidedly mediocre housing market reports came out over the past couple of days. As The Post's Renae Merle reported, the National Association of Realtors said the number of existing-home sales rose 2.9 percent in April, compared to March. That's good news, but it was still down 3.5 percent from a year earlier, and median prices were down 15.4 percent compared to a year earlier. Perhaps the worst news: The inventory of homes for sale nationwide rose to 10.2 months' worth at the current sales pace, up from 9 months' supply in March. That's a long way from the roughly 6 months of inventory that would mark a healthy, balanced market, and the numbers are heading the wrong way.
Renae also reported that prices in the Washington area were down 18.4 percent in March, compared to a year earlier, according to the Standard & Poor's/Case-Shiller index.
FHFA reported yesterday that falling prices in March wiped out price gains from January and February, bringing seasonally adjusted home prices for the first quarter 0.5 percent below the fourth quarter of 2008.
Share your reports from the field. What are you seeing right now with prices and supply of homes for sale?
May 28, 2009; 6:00 AM ET
Categories: Foreclosure , Statistics , The economy , The market
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