Real Estate Outlook: Home Prices Fall

Home prices were on the downswing in the third quarter, according to the latest report from both the Case-Shiller Index and the Federal Housing Finance Agency.

The indices found that while levels were below third quarter 2010 numbers and the annual rate of decline for the last quarter range from 3.6 to 3.9 percent.

"Home prices drifted lower in September and the third quarter," says David M. Blitzer, Chairman of the Index Committee at S&P Indices. "The National Index was down 3.9% versus the third quarter of 2010 and up only 0.1% from the previous quarter. Three cities posted new index lows in September 2011 - Atlanta, Las Vegas and Phoenix. Seventeen of the 20 cities and both Composites were down for the month. Over the last year home prices in most cities drifted lower. The plunging collapse of prices seen in 2007-2009 seems to be behind us. Any chance for a sustained recovery will probably need a stronger economy."

Where are home prices today?

For many areas of the country they have returned to 2003 levels, meaning even more homeowners are now facing being upside down in their home loans. Many experts foresee, however, continued increments of growth throughout 2012.

For now, home sales are improving. Many buyers are taking advantage of low interest rates and these reduced home prices.

In the new home segment, sales rose 1.3 percent in October. According to the National Association of Home Builders this is the largest rise since May.

"Builders have been seeing some marginal improvement in sales activity over the past few months, particularly in select markets where consumer confidence is higher due to improved economic conditions," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "While this trend is encouraging, overall sales activity is still well below normal due to the effects of overly tight credit conditions for builders and buyers, the continued flow of distressed properties on the market, and inaccurate appraisal values on new homes."

Regionally, new-home sales held unchanged in the Northeast and gained 22.2 percent in the Midwest and 14.9 percent in the West in October. The South was the only region to post a decline, of 9.5 percent.

Commercial markets, however, continue to struggle. The National Association of Realtors reports that vacancy rates are flat and leasing is soft. Additionally, construction remains slow. Of the builders surveyed by the NAHB, a staggering 96 percent indicated activity is lower than normal. Prices are below construction costs in 83 percent of markets.

Will the market turn around? Lawrence Yun, NAR chief economist reports that "with modest economic growth and job creation, the fundamentals for commercial real estate should gradually improve in the coming year."

Written by Carla Hill for www.RealtyTimes.com Copyright © 2011 Realty Times All Rights Reserved.