NAR Home Sales Report Shows Some Nasty Declines

The NAR metropolitan home sales report for Q1 came out Tuesday morning, and showed some nasty declines. For the most part, falling home prices accelerated sharply in the first quarter, with California getting hit particularly hard.

Overall, for the U.S. as a whole, Q1 home prices fell -7.7% from year ago levels. But as California had held up better than most markets for a while, those cities now look like they are playing catch-up on the downside.

Here are some of the cities showing the largest declines:

-29.2%: Sacramento, CA

-27.7%: Riverside/San Bernadino, CA

-17.0%: Ft. Myers, FL

-16.9%: Cleveland, OH (Go Cavs!)

-15.4: Phoenix, AZ

There were few cities showing big increases, but here are a few showing gains:

+11.8%: Binghamton, NY

+10.4%: Peoria, IL

+10.1%: Spartanburg, SC

+9.0%: Yakima, WA

+6.3%: Farmington, NM

+3.5%: Salt Lake City, UT

Here are how some other notable large cities are faring:

-13.1%: Washington, DC

-9.6%: Atlanta, GA

-7.8%: Boston, MA

-6.6%: Chicago, IL

-6.1%: San Francisco, CA

-3.9%: New York, NY

-2.1%: Dallas, TX

While I think that the pace of the declines has seen its worst levels, I still do not have the sense that real estate markets overall have bottomed. I think the fact that credit remains hard to obtain has made the pool of buyers permanently lower. I also think there are many sellers that remain unwilling to lower their prices.

Unlike stock markets, real estate markets often form long and shallow bottoms that take years to take shape. As such, I think it will be many years before we see the highs in residential real estate values that peaked around 2006.

Comments

[mlambert890]

I think we wont be done until US median is 35% off from its last peak. I also think that some markets will implode severely and others will simply give up much of their normal growth over the next few years (NY comes to mind, propped up by foreign money)

My thinking is it will take 3-5 years to find the real bottom of this and then things will settle back into the *normal* pattern of growth. Possibly even slower than normal for another 5 or so depending on the health of the broader economy. Hopefully we'll never return to the unsustainable and ludicrious bubble growth.

[tcornelison]

Credit is not hard to obtain for qualified buyers. It is difficult to obtain if you don't qualify for the loan to begin with, as it should be. If credit guidelines had been normal, as they are now, for the last 5 years we would not be in this mess now. I have been a mortgage lender for 15 years. It is still easier to get a low downpayment loan than it was in 1993!

[urbanexus]

One of the interesting things is how high cost metropolitan areas such as the SF Bay Area, where land use and environmental regulations are tight and the ratio of incomes to housing prices is high, have suffered relatively lesser declines as compared to nearby less regulated and lower cost regions such as Sacramento and Stockton. Is this because there was less sub prime activity in the high cost regions coupled with the perceived quality of life helping to stem declines in housing prices?

[gwinner]

My observation in California is that new communities, where significant sales occurred between 2003 and 2007, are the hardest hit. So, its spotty. In landlocked locations like SF, you didn't see massive build outs of new homes. You need not go all the way to Sacramento and Stockton to see this. Look across the bay to Contra Costa County (San Ramon, Brentwood, etc.) and you see the homeowner carnage, wailing and gnashing of teeth.

[mallarde]

In places like S.F. and certain parts of L.A., immigration and population growth have helped to drive up prices. Prices might not sink down to pre-bubble levels because demand has increased so much whereas supply has not. L.A. has become so crowded, it stands to reason that more desirable neighborhoods are more expensive now. They will not sustain their bubble levels, but will even out above pre-bubble levels.

[Tom Lindmark]

Some good points but I am becoming more and more convinced this is a regional rather than a national problem. Therefore, we may all be over reacting a bit. Here are my thoughts as of yesterday on the issue-blog.metro-real-estate...

[e2800]

You people that sing the supply and demand tune, don't get it. it was never supply and demand, it was and always has been affordability. The housing price increase we saw in the 70's was due to the "invention" of 2 income households, with 2 incomes you could now afford X dollars per month therefor you could buy a house for more money, and prices rose. In the mid to late 80's we saw some good economic times that rose income levels, interest rates backed off the late 70 highs and and homes became more affordable on a monthly basis, for a short time driving the rise that busted in 1989-1991. So the question is where is the next factor that will drive prices up again. Think about that. Its not immigration, immigrants can't afford homes with regular financing. Its not supply and demand, the aging population will more likely be downsizing in the next 10 years putting more homes on the market not less. Bottom line, that boom is gone . The 3 BR 1 Bath for $600,000 in L.A. will never get there again with out 1% interest rates, or counting multi families living in 1 house as household income.