March 21, 2011 (Shirley Allen)
There’s more bad news for home prices according to another leading home pricing index. RadarLogic is reporting that home prices have declined to levels not seen since May of 2003. According to the company’s just released RPX Composite index, home prices for the Midwest, West, and the South declined in 2010 in excess of 5 percent from the year earlier with the prices in the Northeast declining just 1.5 percent.
On a month-over-month basis, the RPX Composite price performed worse than its 10-year average in 10 of 12 months in 2010. On a year-over-year basis, the performance of the RPX Composite price through December 31 was worse in 2010 than in any other year save for the bust years of 2007 and 2008.
“No matter what you call it, a ‘double dip’ or the continuation of a long process of deterioration, the current trend in home prices is evidence that housing markets are continuing to languish,” said Quinn Eddins, director of research at Radar Logic.
The 25-metro-area RPX Composite price reached its lowest level since its peak in 2007. The value is based on data from home sales that closed during the 28 days ending January 3, 2011. At $183.18 per square foot, the current RPX Composite price is 34 percent lower than its peak value of $278.32 per square foot, which reflects closings during the period ending June 8, 2007. The RPX Composite price is lower than the price for any other date since May 14, 2003.
The report points out that government intervention at the end of 2009 and the beginning of 2010, in the form of homebuyer tax credits, rather than jump starting the housing market only had a temporary effect as the stimulus expired. The rapid decline in the RPX Composite transaction count during July reflects waning demand after the June 30 contract signing deadline for the homebuyer tax credits. This contributed to a large year-over-year gain in transactions compared to 2009, but the termination of the credits contributed to a large year-over-year decline in 2010.
In 2010, REO sales increased from 26 percent to 31 percent of total sales, with 22 of the metropolitan areas exhibiting a year-over-year gain in REO sales’ share of total sales. REO’s were typically discounted a consistent 40% during the entire year of 2010.
As of December 31, prices for 20 of the 25 metropolitan areas had declined between 25 percent and 62 percent from their peaks with Las Vegas seeing the biggest decline at 61.8 percent. Unfortunately, RadarLogic says they expect the PRX Composite price will continue to exhibit year-over-year declines throughout 2011 due to a growing supply of homes both for sale and being held in the inventories of financial institutions as weakening demand due to a lack of government incentives for homebuyers.
“We expect the negative trend to continue under a severe supply overhang that includes a large and growing ‘shadow inventory’ of homes in default or foreclosure,” Eddins added.
Tags: RadarLogic, home price index, home prices, double dip, lowest price, level, homebuyer tax credit, REO sales, shadow inventory