U.S. home prices fell 3.1 percent in the first quarter from a year earlier as record foreclosures added to the inventory of houses on the market.
The annual drop was double the 1.5 percent decline in the fourth quarter, the Federal Housing Finance Agency said today in a report. Measured from the prior three months, prices fell 1.9 percent in the first quarter, the Washington-based agency said.
The main hurdle for a housing recovery is foreclosures boosting the supply of homes for sale, said Patrick Newport, an economist with IHS Global Insight in Lexington, Massachusetts. The inventory of properties on the market jumped to 4.04 million in April, the highest level since July, the National Association of Realtors said in a report yesterday. That number doesn’t include all foreclosures, Newport said.
“Excess supply drives prices down, and foreclosures are still adding to inventory,” Newport said in an interview before the report. “We’ve seen price improvement in some local markets, but on a national basis prices still haven’t hit bottom.”
Home prices in 20 U.S. cities rose 2.3 percent in March from a year earlier, according to the S&P/Case-Shiller home-price index released today. That was less than the 2.5 percent median forecast of economists surveyed by Bloomberg News.
Home Sales Drop
Sales of existing homes fell 14 percent in the first quarter to an annual rate of 5.14 million from 5.97 million in the previous three months, the National Association of Realtors said in a May 11 report. Purchases climbed 7.6 percent in April from March as buyers rushed to qualify for the government’s homebuyer tax credit before its expiration at the end of last month, NAR said yesterday.
The inventory of homes in foreclosure rose to a record 4.63 percent in the 2010’s first quarter from 4.58 percent in the prior period, the Mortgage Bankers Association said in a report last week. The combined share of foreclosures and mortgage delinquencies was 14 percent, or about one in every seven U.S. mortgages.
Federal Reserve policy makers discussed foreclosures during their April 27 and 28 Open Market Committee meeting, according to minutes released last week.
“Some participants saw the possibility of elevated foreclosures adding to the already very large inventory of vacant homes as posing a downside risk to home prices, thereby limiting the extent of the pickup in residential investment,” according to the minutes.
Today’s FHFA report measures changes in real estate values using repeat data on individual properties. It doesn’t include a dollar value for homes. The U.S. median home price was $166,100 in the first quarter, according to NAR.