Year-Over-Year Home Prices Exhibit ‘Improving Declines’

As the real estate market retreats further from the period of peak distress in home prices, declines in prices are beginning to narrow, according to the LoanPerformance Home Price Index (HPI) released Thursday by Santa Ana, California-based ""First American CoreLogic."":http://www.facorelogic.com/

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On a year-over-year basis, national home prices, including distressed sales, declined by 3.7 percent in December 2009. When compared to November's year-over-year decrease of 5.3 percent, December's HPI marked a notable improvement in home price reductions. Excluding distressed sales, home prices in December dropped 3.3 percent from the same month in 2008, 1.7 percent less than November's year-over-year HPI decrease of 5 percent.

Despite year-over-year improvement, home prices declined moderately on a month-to-month basis. According to First American, home prices fell 1 percent in December compared to November, indicating seasonal slowing in a fledging housing recovery.

According to First American's forecast, home price declines are expected to continue into the spring months. Through April, the national PHI is projected to fall an average of 4.4

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percent, as high levels of unemployment, housing inventories, and foreclosures continue to exert downward pressure on prices.

Given the current scheduled expiration of the federal homebuyer tax credit, April will likely be a critical month for the housing market, First American said. The tax credit provided considerable support to house prices in 2009, and the forecast model currently indicates that prices after April will be significantly impacted by whether the tax credit is allowed to expire or is once again extended.

""The housing market, after experiencing stabilization in many, but not all, markets in the spring and summer of 2009 is going through the typical seasonal winter malaise,"" said Mark Fleming, chief economist for First American CoreLogic. ""The big unknown for the 2010 spring selling season continues to be the future of the federal home buyer tax credit.""

From its peak in April 2006, the HPI, including distressed transactions, plummeted 28.2 percent through December. Excluding distresses sales, the peak-to-current change in the HPI was 21.5 percent. The 12-month HPI forecast, though, is positive. By December 2010, the HPI, excluding distressed sales is expected to be up by 3.5 percent, and including distressed sales, it is projected to jump 2.7 percent.

With a 20.8 percent year-over-year decline in December, Nevada remained the top-ranked state for annual price depreciation when distressed sales were included. Arizona, Idaho, Florida, and Michigan took the remaining top-five spots. Of these five states, all but Michigan showed month-to-month HPI decreases from November to December. When distressed sales were excluded, Nevada still held the top spot for the worst year-over-year price declines, followed closely behind by Arizona, Florida, Michigan, and Maine.