Housing Prices Dip Below March 2009 Lows

If we didn't know it before, we do now. We are officially in a double-dip housing recession.

A report from Clear Capital shows the average U.S. home price nationwide has dipped below the low recorded in March 2009. A combination of foreclosures and short sales attracted bargain-conscious buyers in recent months, many paying in cash and making low-ball offers.

Also skewing the results is the fact that low-priced, distressed properties are selling faster than more expensive homes, so the average price per sale has fallen.

The numbers

The results are not good news for homeowners, who are seeing their equity melt away month after month. The Clear Capital Home Data Index Market Report shows the national average home price is down 0.7 percent from the March 2009 low.

National quarterly home prices fell 4.9 percent, while year-over-year national price changes reached minus 5.0 percent. National home prices have fallen 11.5 percent over the previous nine-month period, a rate of decline not experienced since 2008.

In a sign of the continued volatility and fragility of home prices, all the major Metropolitan Statistical Areas (MSA) tracked in this month’s report showed quarter-over-quarter price declines.

“The latest data through April shows a continued increase in the proportion of distressed sales that are taking hold in markets nationwide,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital. “With more than one-third of national home sales being REO (sales by banks), market prices are being weighed down as many markets have not regained enough footing to withstand the strain of the high proportion of REO sales.”

Stormy weather

The weather didn't help either. A bitterly cold and snowy February brought much of the nation's real estate transactions to a halt. The question, says Villacorta, is whether prices can rebound in the historically active spring season.

In the spring of 2009 and 2010, there were homebuyer tax credits in place to encourage consumers to purchase homes. This will be the first spring since 2008 when such an incentive is not in place.

“A note of caution to those looking for a strong end to 2011,” said Villacorta. “The last time no incentives were in place and distressed inventories were this high, home prices fell sharply.”

What will it take for housing to recover? Lawrence Yun, chief economist for the National Association of Realtors, says qualified home buyers need to be able to obtain mortgages.

More mortgages, please

“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun said.

Part of the problem, he says, are requirements for 20 percent or more as a down payment. He says low-down payment programs have been shown to be successful.

Price volatility, meanwhile, remains strongest in the Midwest. Clear Capital reports seven of the lowest major markets are in that region. Detroit remains the lowest performing major market in the Midwest with over 50 percent of its sales occurring in the REO sector.