U.S. home prices fell 4 percent in the fourth quarter from a year earlier as record foreclosures sapped the confidence of homebuyers, according to the Federal Housing Finance Agency.
The drop was the 13th consecutive year-over-year retreat and the largest since 2009’s third quarter, the Washington-based agency said today in a report. Prices fell 0.8 percent from the prior three months. On that basis, economists projected a 0.6 percent decline, the median estimate in a Bloomberg survey.
Foreclosures discourage potential buyers who want to avoid price retreats because they sell at a discount, devaluing other homes. The share of people who intend to buy property dropped to 4.4 percent in February from 5.2 percent in January, according to the Conference Board, a New York-based research firm. Sales of foreclosed homes accounted for 37 percent of transactions last month, up from 36 percent in December, the National Association of Realtors said in a report yesterday.
“Foreclosures drive down prices because lenders don’t want to hold onto houses -- they want to get rid of them as fast as they can,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said before the FHFA report. “That means they’ll keep cutting prices till they make a sale.”
Idaho had the biggest drop in prices from a year earlier, at 16 percent, the FHFA said. Arizona prices tumbled 13 percent, Georgia was down 12 percent, and Alabama and Oregon dropped 10 percent. New Jersey decreased 1 percent, New York fell 1.1 percent and Massachusetts slipped 0.1 percent, according to the report.
North Dakota had the biggest price gain, at 5.1 percent. Alaska followed, at 2.6 percent, and prices in the nation’s capital were up 1.4 percent, according to the report.
The FHFA report measures changes in home values using repeat-sales data on properties with loans backed by Fannie Mae or Freddie Mac, the biggest mortgage-finance companies. The results may be misleading because they exclude the all-cash transactions that are typical in foreclosure deals, said Paul Dales, a senior economist at Capital Economics Ltd. in Toronto.
“This index may be underestimating the true extent of the price falls,” Dales said in a report today. “It misses any of the heavily discounted foreclosed properties that are being bought with cash.”
Almost a third of existing-home sales in January were bought with cash, the National Association of Realtors said in a report yesterday. That was the highest share since the group started tracking the financing of property in 2008.
Another home-price measure this week that does include all- cash foreclosure sales also showed price declines. Real-estate values in 20 U.S. cities tumbled 4.1 percent in the fourth quarter from a year earlier, the biggest drop in almost two years, according to the S&P/Case-Shiller home-price index. The slump put prices near the record low set in the first quarter of 2009, during the recession.
The share of homes in foreclosure rose to 4.63 percent in the fourth quarter, matching an all-time high set in the first three months of 2010, according to the Mortgage Bankers Association in Washington. The combined share of mortgages in foreclosure or delinquent was 14 percent, about 1 in every 7 home loans, the trade group said in a Feb. 17 report.
Homes in the foreclosure process sold last year at a 28 percent discount to properties that weren’t in some stage of mortgage distress, RealtyTrac Inc. said today. The gap widened from 27 percent in 2009 and 22 percent in 2008, according to the Irvine, California-based data firm.
The inventory of U.S. homes for sale rose to a record in mid-2010 as buyers waited for better deals. The supply, measured as the time it would take to sell all the properties, reached a high of 12.5 months in July, according to National Association of Realtors data.
About one in four mortgaged U.S. homes is underwater, meaning their mortgage balances exceed current value, according to Zillow Inc. The number of homeowners with so-called negative equity reached 15.7 million in the fourth quarter, up from 13.9 million in the prior three months, the Seattle-based real estate data firm said in a Feb. 9 report.
Federal Reserve policy makers described the U.S. real estate market as “depressed” in a Jan. 26 statement following the end of a two-day meeting in Washington. The central bankers said falling home values continued to stymie the consumer spending that accounts for about three-quarters of the world’s largest economy.
Today’s FHFA report doesn’t include a dollar value for homes. The U.S. median home price was $169,800 in the fourth quarter, according to the National Association of Realtors.
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