February 22, 2011 (Chris Moore)
Driven in part by rising sales of distressed properties and higher foreclosure-sales discounts, home prices declined for the seventh straight month in December and suffered their largest one-month drop during the year according to FNC’s recently released Residential Price Index (PRI). According to the RPI, 2010 year end prices declined by more than 3.4 percent since January 2010.
Twenty-three out of the 30 major metropolitan markets tracked suffered price declines in December that averaged 2.2 percent.
Home prices dropped in the double digits year-over-year in Atlanta, Chicago, Las Vegas, Orlando, and Phoenix while San Diego, Los Angeles, and San Francisco had the best performing markets during the year with increases of 5.1 percent, 7.8 percent and 8.1 percent, respectively.
The FNC RPI blames the deteriorating trend in home prices from increased sales of foreclosed properties. As a percentage of total homes sold (both new and existing), sales of distressed properties increased to 26.8 percent in the fourth quarter compared to 25.5 percent in the third quarter and 23.5 percent in the second quarter of 2010.
The foreclosure sales discount in the fourth quarter was 40.8 percent compared to 39.2 percent in the third quarter and 36.6 percent in the second quarter of 2010.
The FNC RPI also predicts that more foreclosure sales are expected since lenders announced in December that they would resume foreclosure sales following the “robo-signing” controversy.
Accordingly, FNC anticipates further downward pressure on home prices in the coming months with the upside that the resumption of foreclosure sales will reduce surplus of distressed properties and eventually bring supply to levels in line with weak housing demand, paving the way for a more sustainable housing recovery later.
The Residential Price Index, created by mortgage technology company FNC, is the industry’s first hedonic price index built on a comprehensive database combining public records and real-time appraisals. If you’d like to review the Index, click here.
Tags: FNC RPI, distressed properties, foreclosure sales, home prices, price declines, downward pressure, mortgage technology