After Five Years of Declines, US Home Prices Begin to Stabilize

An analysis of home price trends in more than 275 US markets based on the Fiserv® Case-Shiller Indexes show that a growing number of metro area housing markets are beginning to stabilize after five years of record home price declines.

In the third quarter of 2010, U.S. single-family home prices saw an average decrease of just 1.5 percent over the year-ago quarter.  Fiserv and Moody’s Analytics report that home prices have already leveled out in one out of four metro areas. They estimate that price stability will characterize 75 percent of U.S. metro markets by the end of this year and 100 percent of markets by the end of 2012.

Even as metro markets stabilize, the Fiserv Case-Shiller data analysis indicates a slow recovery in home prices with many false starts, especially in markets with large amounts of foreclosed properties.

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“Large supplies of foreclosed properties will continue to be the biggest downside risk for home prices and metro area housing markets,” said David Stiff, chief economist, Fiserv. “Foreclosure activity declined at the end of 2010, but sales activity of bank-owned homes increased. In bubble and crash markets, the uncertain timing and volume of bank liquidated properties will cause home prices to bounce around their lows for many years.”

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Markets where prices have already stabilized include San Diego, Washington, D.C., and San Francisco.  Fiserv expects that home prices will stabilize in Minneapolis, New York City and Portland by the end of 2011.  Some areas where values will not stablize until 2012 include Miami, Phoenix, and Las Vegas.

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  • The best the prognosticators offer is stability. Looking at the numbers, it seems the best they can show is a slowing trend in declines BUT with some increased declines in the short run. That is still not stability.

    There is little indicative substance in home resale prices and sales volume during the first quarter of any calendar year. It seems as believed by some back in 2009, prices on a national average will not trend up on a substantial basis until at least late Spring 2013.

    Until the glut of foreclosed homes and homes in irreversible default are being systematically released into the market with a clear rate of absorption, prognostication is more speculation than identification of trends. Although occasionally mentioned, the biggest concern some of us have is not with foreclosure absorption but with the pent up homes which homeowners want to put up on the market but do not feel compelled to do so in this climate. These homeowners could clog the market for years.

    Some also overlook estates which need to divest their residential properties and charitable organizations with the homes they hold but need to get rid of in their endowment funds. Unless the resale market is quickly “eating up” the existing inventory this summer, 2013 could be another year of “holding tight.”

    Last time California experienced a downturn like this (and there was only one other time in the last 70 years which came close), it took a full decade for home values to return to their pre-market drop levels; the rest of the country was generally on an up swing in that decade. Yet during that same decade, HECMs did quite well in California. That was then but perhaps history will repeat itself. Can California once again lead the industry into expansion despite its over 4% HECM penetration rate as an RMD article recently pointed out? Time will tell.

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