July 21, 2011 (Chris Moore)
Radar Logic’s RPX Composite Price Index (CPI) for May declined 5.9 percent compared to May of 2010, continuing a pattern of year-over-year price declines that has accelerated since June of 2010 and was the fastest rate of decline in home prices since September 2009.
With the CPI at virtually the same level in May as it was in January, the seasonal price bump that would normally be observed during this time of the year has been virtually non-existent during the current year. Prior to this year, the largest price gains in seven of the last 10 years have typically been seen from January to May.
Although there were month to month price increases in April and May, those barely offset the price declines registered at the beginning of the year. Without the seasonal price bump in home prices, Radar Logic predicts this “foreshadows new post-bust lows this fall.”
Home buying demand in the fall typically softens and pulls housing prices downward, and with the absence of the seasonal bump, home prices may reach their lowest levels since the housing crisis began.
In addition, not only has this been the trend for housing prices, it has also been the trend in the rate of home sales transactions. The home sales transaction count in May also declined year-over-year, with the rate of decline in home sales accelerating since February.
“Given the time of year, the results of our RPX analysis are far weaker than we had hoped. Prices are falling year over year as activity continues to languish. Inventory continues to be the problem and there are no signs of any strength in absorption,” said Michael Feder, President and CEO of Radar Logic. “We expect the CBOE futures market in RPX contracts to open soon and expect to see trading indicate an expectation of significant weakness in housing going forward, at least in the near term. It would not surprise us to see opening bids down 10 to 15 percent from spot.”
The CPI reports that all 25 metropolitan areas featured in the report registered year-over-year price declines.
Regionally, the West and the Midwest registered the largest year-over-year price declines with Seattle registering the largest decline of 14.7 percent followed by Sacramento with an 11.9 percent decline and Milwaukee with an 11.6 percent decline.
The Northeast and the South had the smallest price declines led by New York with a 0.4 percent decline, followed by Charlotte with a 1.1 percent decline and Washington D.C. with a 4.6 percent price decline.
Eighteen of the 25 metropolitan areas registered price gains from April to May. Six of the seven areas that registered declines were in the West, with four of those in California. Radar Logic points out that the significance of this can be important because traditionally it’s the California market that is usually a bellwether for trends in the rest of the country.
Tags: Radar Logic, RPX Composite Price Index, housing prices, housing sales transactions, rate of decline, seasonal price bump, declining prices, housing crisis