Summer was good, in relative terms, for housing prices. However, the change of seasons has caused more than leaves to fall. In September, for the second consecutive month, housing prices decreased 1.1 percent from the prior month, according to real estate research firm CoreLogic. Unsold home inventory increased due to a fresh round of foreclosures, worsening the situation.
The CoreLogic index fell steadily during last winter, only to level out over the summer. Record low interest rates for mortgages seemed to place a floor on home values. However, the most recent decline has left housing prices 4.1 percent lower than in September 2010. As foreclosures continue to flood the market, the outlook for prices is a bit cloudy.
Some banks are slowing their foreclosure process in an attempt to avoid adding unsold inventory. Lenders are slashing prices on foreclosed homes, forcing general housing prices even lower. A significant percentage of the homes that are selling are distressed properties. CoreLogic Chief Economist Mark Fleming expects the decline to continue through this winter, as home prices adjust to match the imbalance between supply and demand.
Houses are now the most affordable since the housing bubble popped five years ago. However, demand is restricted due to high unemployment and a weak economy, among other reasons. This is reflected in the accelerated decline rate of the CoreLogic housing price index. Mortgages are inexpensive but only people with excellent credit scores qualify. With cash advances and other outstanding debts on their credit reports, many consumers cannot get approved.
Some prospective buyers are holding out for an indication that housing prices have bottomed. Millions of other Americans owe more than their home is worth, making relocation an unattractive option. Capital Economics housing economist Paul Diggle does not anticipate consistent gains in housing prices for at least two more years.
