Wisconsin-based Fiserv, Inc. has published a new analysis of home price trends based on the Fiserv Case-Shiller Home Price Index and data from the Federal Housing Finance Agency (FHFA). The company says the U.S. housing market continues its price correction, with single-family home prices at the end of the first quarter just seven percent above the levels in early 2000, the start of the housing bubble.
According to Fiserv’s study, home prices across the country have fallen 19 percent over the 12-month period ending March 31, 2009. The national median price at the end of the first quarter was $167,300.
In about 10 percent of U.S. metro markets, home prices, relative to income, are now lower than they were prior to the bubble, Fiserv reported. In Los Angeles, for example, home prices more than doubled relative to income between 2000 and 2006. Currently, homes in the Los Angeles market are only 25 percent more expensive than they were in 2000, representing a closer return to pre-bubble levels and a substantial improvement in affordability.
David Stiff, Fiserv’s chief economist, said, “The Fiserv Case-Shiller Home Price Index numbers continued to show falling home values in sand states such as California and Florida, but there is a silver lining in the cloud of rapidly falling prices. Housing affordability is quickly being restored in many markets and the pool of buyers who can afford to purchase homes is increasing at a rate not seen in recent years, setting the stage for home price stabilization.”

Over the next year, Stiff forecasts that national home prices will drop another 11 percent, and bottom out in early 2010. But even with increased affordability, Stiff warns that recovery in home prices will be “tentative and weak.”
“Even with lower prices, potential home buyers who have not lost their jobs may lack the confidence to buy a home when the economy is performing so badly,” Stiff said. “Even those who are confident their jobs are secure may not have access to mortgage credit. Further, even as housing demand improves there will be a large overhang of foreclosed properties that will continue to be a drag on prices.”
Fiserv said in its report that home price declines remain sharp and are showing no sign of moderation across California, Arizona, and Florida – markets that have already seen home values fall 40 percent to 50 percent since prices peaked in 2006.
In San Jose, California, for example, average home prices declined 31 percent over the past year, and are projected to fall another 12 percent over the next year, Fiserv said. In Tucson, Arizona, average home prices declined almost 20 percent over the past year. Similarly, the Orlando, Florida market saw a decline of just over 29 percent within the last 12 months, with a projected decline over the next year of another 26 percent.
Other metro areas, Fiserv says, are better positioned for recovery. In markets such as Warren, Michigan, and Oakland, California, housing is more affordable now than before the bubble, with home prices declining 37 percent and 49 percent respectively, from their peak levels. Salt Lake City, Utah, which had largely been spared falling home values over the past three years, saw average home prices drop almost 5 percent over the last year but is expected to see an additional decline of 12.5 percent over the next year.