Housing Prices Drop in February, But Not As Much

Home prices in Phoenix have fallen dramatically since 2006.

About a month ago we reported that housing prices had dropped record levels in January. But February provided a little better news. The Case-Schiller Index, which follows the housing prices of 20 metropolitan areas, dropped again in February. But the drop of 2.2% was not a record for the first time in months, including the double digit decline of 18.6 percent versus last year.

And while some markets such as Phoenix, Las Vegas, and Miami have lost around half their value in recent months when compared to levels during the boom, other markets have not been hit as badly. Furthermore, sales in 10 states, including California, have increased.

The average price of a home in the United States has fallen from $230,000 at the height of the boom to $175,000.

Housing Prices Drop Record Levels In January

The New York Times published a big story today on the record decline in home values in Standard & Poor’s Case-Schiller Property Index. The Index, which measures the home values in 20 metropolitan areas, fell 19% in January from January a year ealier. Since the housing bubble broke, many metropolitan areas have seen their indexes cut nearly in half. Phoenix has seen prices drop 48.5% from its June 2006 peak, while Las Vegas, Miami, San Francisco, and San Diego have all seen declines of more than 40%.

Analysts cited the Case-Schiller Index performance as proof that housing prices have likely still not bottomed out and that the housing market continues to perform poorly. The report is especially interesting in light of the fact that the US Census Bureau recently released a report indicating that the sale of new homes rose in February. While many viewed this report as a sign that the housing sales market has bottomed out, home prices generally take longer to rebound. It is also unsurprising that sales are increasing as prices are plummeting- many are taking advantages of foreclosures and the low prices to enter the market for the first time.

Housing Sales Improve 5.1%

The housing market is on the rise

Although the housing market has been down, it looks like it may be starting to rebound. The Wall Street Journal reported yesterday that housing sales rose 5.1% in February. A similar article a few days earlier reported that sales in California, one of the states hit hardest by the housing crisis, have also improved. According to the California Association of Realtors, homes in California were on the market an average of 6.7 months in January 2009, compared with 16.6 months a year earlier.

While many of the homes that have been spurring the increase in sales nationwide were foreclosed homes, the rejuvinated market should be seen as a positive sign. Mortgage rates (both for mortgages and reverse mortgages) remain low. HECMs are now available to help seniors purchase homes. The increase in home sales are signs that these changes may be working. Although the new HECM for purchase program was not put into effect until after the CA data was collected, it is a positive sign that the market appears ready to support such a program.

While it’s too soon to say the market is on an upswing for good, the rejuvenated market is definitely a step in the right direction and a good sign for lenders, realtors, homeowners, and prospective homeowners alike.