U.S. home prices dropped 3.3 percent in July from a year earlier, the eighth consecutive decline, as foreclosed properties flooded the market.
Prices fell 0.5 percent from June, the Federal Housing Finance Agency in Washington said in a report today. Economists had projected prices to fall 0.2 percent from the previous month, based on the average of 15 estimates in a Bloomberg survey. The agency revised the previously reported May-to-June decline to 1.2 percent from 0.3 percent.
Foreclosures are boosting the supply of available properties and reducing prices, even as mortgage rates tumble to record lows. The time it would take to clear the market of homes for sale was 12.5 months in July, the highest in more than a decade of data, according to the National Association of Realtors. Banks seized a record 95,364 properties from delinquent borrowers in August, according to RealtyTrac Inc., an Irvine, California-based seller of housing data.
“We have a lot of homes for sale, and a lot of them are distressed properties,” said Thomas Lawler, founder and president of Lawler Housing and Economic Consulting in Leesburg, Virginia. “That is putting downward pressure on home prices.”
The biggest price loss was 1.6 percent in the region that includes Florida, Georgia, North Carolina and South Carolina, according to the report. The area that includes Arizona and Nevada posted the second-largest decline, at 1.5 percent.
Nationally, sales of existing homes in July plunged 27 percent to a 3.83 million annual pace, the lowest level on record, NAR said Aug. 24. July sales of new homes dropped to an annual pace of 276,000, the fewest since data began in 1963, the Commerce Department reported Aug. 25.
Falling Mortgage Rates
The average U.S. rate for a 30-year fixed loan fell to 4.32 percent this month, according to Freddie Mac. That’s the lowest in the McLean, Virginia-based company’s records dating to 1971. The rate probably will average 4.6 percent this year, down from 5 percent in 2009, according to Washington-based Fannie Mae, Freddie’s larger rival.
“The low interest rates aren’t giving housing a big enough boost because they’re not attractive to someone who doesn’t have a job or is concerned about keeping a job,” Lawler said.
The unemployment rate probably will average 9.6 percent this year, according to the median estimate of 59 economists in a Bloomberg survey. That would be the highest since the same rate in 1983, data from the Bureau of Labor Statistics show.
Today’s report from the FHFA is based on repeat sales data that compares prices of the same properties over time. The agency, which measures sales of homes with mortgages backed by Fannie Mae or Freddie Mac, doesn’t provide a specific price.
The median home price was $182,600 in July, as measured by NAR. The Chicago-based Realtors’ group is scheduled to issue its report on August sales and prices tomorrow.
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