Home prices fall at fastest rate in 16 years

Home prices in 10 major U.S. cities dropped at the fastest pace in 16 years during the 12 months ending in April, according to Standard & Poor’s Case-Shiller home price index released Tuesday.

Home prices in the 10 cities fell 2.7% on a year-over-year basis, the largest decline since September 1991. Meanwhile, prices in 20 cities dropped a record 2.1% year over year. The 10-city index began in 1987. The more comprehensive 20-city index goes back to 2001. Price appreciation has slowed for 17 consecutive months. Nationally, prices have doubled since 2000.

Fourteen of the 20 cities showed falling prices in the past year, led by Detroit (down 9.3%), San Diego (down 6.7%) and Washington (down 5.7%). Seattle had the largest price gains over the past year at 9.6%, while prices are up 7% in Charlotte, North Carolina, and 6.4% in Portland, Oregon.

Miami’s appreciation turned negative in April for the first time in this cycle; prices in Miami, which had risen 25% in the year through April 2006, are now down 1% in the past year.

“No region is immune to weakening price returns,” said Robert Shiller, chief economist for MacroMarkets LLC and the co-creator of the index. Even in regions such as the Pacific Northwest or the Southeast, where prices are still rising, the gains have been slowing.

A glimmer of hope shone in a few cities?Atlanta, Boston, Dallas and Denver?as they recorded price increases and stronger annual rates of return. “A few more months of data will reveal if it is a seasonal issue or the beginnings of a recovery in these markets,” S&P said in a release.

Falling home prices have squeezed many borrowers who have been able to extract equity from their homes or refinance to avoid a sudden increase in mortgage payments as the interest rate on adjustable-rate loans resets.

As a result of falling prices, foreclosures are rising nationally, especially in regions with a weak economy, such as the Midwest, and in Sun Belt areas deemed bubble regions, such as Southern California, Florida, Nevada and Arizona.

The Case-Shiller index is considered a superior gauge of home prices compared to the median sales-price data released by the Commerce Department or the National Association of Realtors, because it tracks multiple sales on the same property and is therefore not influenced by a different mix of homes sold in a period.

Unlike the quarterly price index produced by the Office of Federal Housing Enterprise Oversight, the Case-Shiller index does not include refinancings. And, also unlike the OFHEO index, it includes homes with mortgages larger than the conforming limit of $417,000.

However, the Case-Shiller index is restricted to 20 cities. The OFHEO index is up 4.3% in the past year, while the purchase-only OFHEO index is up 3%.

Case-Shiller Details:

Atlanta: up 0.8% in April, up 2.1% year-on-year
Boston: up 0.6% in April, down 4.5% year-on-year
Charlotte: up 1.2% in April, up 7% year-on-year
Chicago: down 0.7% in April, up 0.2% year-on-year
Cleveland: down 0.2% in April, down 2.8% year-on-year
Dallas: up 1.3% in April, up 2% year-on-year
Denver: up 0.5% in April, down 1.8% year-on-year
Detroit: down 2.5% in April, down 9.3% year-on-year
Las Vegas: down 0.8% in April, down 3% year-on-year
Los Angeles: down 0.5% in April, down 2.6% year-on-year
Miami: down 1.2% in April, down 1% year-on-year
Minneapolis: down 0.5% in April, down 2.9% year-on-year
New York: down 0.2% in April, down 1.5% year-on-year
Phoenix: down 0.8% in April, down 4.5% year-on-year
Portland: up 1% in April, up 6.4% year-on-year
San Diego: down 0.3% in April, down 6.7% year-on-year
San Francisco: up 0.2% in April, down 2.8% year-on-year
Seattle: up 1.3% in April, up 9.6% year-on-year
Tampa: down 1.1% in April, down 5% year-on-year
Washington: down 0.5% in April, down 5.7% year-on-year
10-city composite: down 0.3% in April, down 2.7% year-on-year
20-city composite: down 0.2% in April, down 2.1% year-on-year

Rex Nutting is Washington bureau chief of MarketWatch.

My Santa Cruz County Real Estate Report/June 2007

If you recall from last month, I reported the median price was higher than it had been since November 2005. How does that old saying go? The more things change, the more they stay the same. So here we go again, this month the numbers show a bit of a drop back to $760,000 now mirroring prices of a year ago. In addition, we have over 7 months of inventory which suggests a buyers market. The days on the market have improved and the percentage of listing price vs. selling price increased. A possible sign that we are starting to clear out the older inventory.

Different areas of the County are experiencing some highs and lows. Watsonville has the highest amount of inventory with 26.8%. Santa Cruz follows with 19.1% and the San Lorenzo Valley at 17.8%. As you might expect, the number of sales in these areas shows Santa Cruz at 31.7% and Watsonville with the fewest at only 9.6%.

Tighter lending rules are keeping some buyers out of the market. Mortgage lenders are tightening standards in ways that can make it much more difficult for potential borrowers to get approval for loans. The new standards fall into the following areas, according to Wells Fargo & Co. and other large lenders:

Ability to repay. Buyers are no longer being qualified at the low initial rate. They must qualify for the loan payments at rates equal to what the loan would be if it reset at a higher rate.
Down payment. Lenders want buyers to put some money down, even as little as 5 percent or 10 percent. Loans for 100 percent of the price are very hard to get.
Credit score. Credit scores range from the high 300s to the low 800s. Borrowers with a credit score above 680 are likely to qualify for a reasonable deal. Between 660 and 680, they may qualify, but the deal could be pricey. Potential borrowers with a score of 620 or less need to raise their scores before they can qualify.
Income and income verification. Producing proof that a borrower has a job is key; “stated income” loans are much more difficult to get. Also lenders are unlikely to approve a loan in which the home buyer will spend more than 45 percent of his gross income paying off debt, including paying the mortgage.
At 17 percent, Utah registered the highest rate of residential appreciation in the nation during the first three months of this year compared to the same period in 2006, the U.S. Office of Federal Housing Enterprise Oversight reports. It was the second quarter in a row that Utah weighed in ahead of all other states, according to the agency. On a nationwide scale, the rate of home-price growth for the three months came in at 4.25 percent. (Santa Cruz County is at 2.81%)

Also performing well-above the national norm during the first three months of this year were:
Idaho: 12.27 percent
Montana: 11.68 percent
Wyoming: 11.67 percent
Washington: 11.63 percent
For the sixth consecutive year, President Bush has proclaimed June as National Homeownership month. Nearly 70 percent of Americans currently own homes, and the rate of homeownership among minorities is above 50 percent. In his proclamation, the President stated: 'During National Homeownership Month and throughout the year, I urge citizens to consider homeownership opportunities in their communities, and I applaud American homeowners for helping fuel the economy.'

Here is what is happening in our local Santa Cruz county market, for other areas please give me a call.
----------------------------------------------------------------------
May Monthly Statistical Highlights for Single Family Homes:

* Inventory up 6.4% compared to May 2006, with a slight increase of 4.0% from April 2007
* Sales down 15.7% compared to May 2006, but an increase of 10.3% from April 2007
* Days on the market decreased to 89, month prior 104, last May at 72
* Median home price matched May 2006 at $760,000, and decreased 2.1% from April 2007
* Sales price vs.listing price ratio increased to 97.74%
-----------------------------------------------------------------------
(These statistics are believed to be accurate but not guaranteed)