Median home prices drop across US

May 13, 2008 3:06:45 PM PDT
Median home prices fell in two-thirds of the cities surveyed during the first three months of this year while sales declined in 46 states compared to a year ago, according to the latest report highlighting the depth of the nation's housing woes. The National Association of Realtors said Tuesday that median prices for existing single-family homes dropped in 100 of 149 metropolitan areas in the January-March period, while 48 metropolitan areas saw price increases and one reported no change.

The 67 percent of cities reporting price declines was the largest percentage of cities reporting price drops in the history of the survey, which goes back to 1979. In the fourth quarter, prices had fallen in 36 percent of the cities surveyed.

Nationally, the median home price - the point where half the homes sold for more and half for less - fell to $196,300 in the first quarter, down by 7.7 percent from the same period a year ago.

The biggest percentage price decline by metro area was a 29.2 percent drop in the Sacramento, Calif., metro area.

Sales of existing homes were down in 46 states for the first three months of this year, compared to the same period a year ago. The largest percentage plunge was a 38.6 percent drop in Maryland during the first three months of this year compared with the same period in 2007. Only Alaska, Indiana and New Jersey reported sales increases during the survey period. Data for New Hampshire was not available.

Nationally, sales fell by 22.2 percent in the first quarter compared with the same period a year ago.

The steep declines in prices and sales were the latest indication of the problems facing the housing market, which is in a prolonged slump that has contributed to pushing the country to the edge of a recession.

Analysts blamed much of the problem in the first quarter on soaring mortgage foreclosures which are dumping more homes on an already glutted market and the credit squeeze, which has made it hard to obtain so-called jumbo loans to purchase higher-priced properties.

"These are highly unusual results because there were very few jumbo loan originations in the latest quarter, so sales are much slower in high-cost areas, and at the same time foreclosures related to subprime mortgages rose," said Lawrence Yun, chief economist for the Realtors.

While subprime loans, which were made to borrowers with weak credit histories, account for 10 percent of all homeowners, they make up more than half of all foreclosures, Yun said. "Sharp price declines are principally in neighborhoods where subprime lending has been widely prevalent," he said.

Many analysts believe that prices will continue to fall for the rest of this year until the inventory of unsold homes gets worked down to a more manageable level.

"The bottom line is that construction spending and house prices seem likely to continue to decline well into 2009," Janet Yellen, president of the Federal Reserve Bank of San Francisco, said in a speech Tuesday.

Of the 48 metropolitan areas reporting price increases, the largest percentage price gain occurred in the Binghamton, N.Y., area where the median price rose by 11.8 percent from a year ago to $109,700. Peoria, Ill., was next with a 10.4 percent price increase followed by Spartanburg, S.C., with a 10.1 percent increase.

By region of the country, prices were up 3.2 percent in the Northeast from a year ago but down in all other regions of the country. The region with the biggest price drop was the West, down 12.3 percent, followed by declines of 7.9 percent in the Midwest and 7.5 percent in the South.

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AP Economics Writer Jeannine Aversa contributed to this report.

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On the Net:

National Association of Realtors: http://www.realtor.org

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