Housing Affordability Being Restored In Many Markets

Posted by Orb Staff on July 23, 2009 No Comments
Categories : Residential Mortgage

Inc. has released an analysis of home-price trends in more than 375 U.S. markets based on the Fiserv Case-Shiller Home Price Index, which is owned and generated by Fiserv and data from the Federal Housing Finance Agency (FHFA). According to the index, the U.S. housing market continues its price correction, with single-family home prices across the U.S. falling 19% over the 12-month period ending March 31. On average, compared to family income, U.S. home prices at the end of the first quarter of 2009 were just 7% above the levels of early 2000, at the start of the real estate bubble. In about 10% of U.S. metro markets, home prices, relative to income, are now lower than they were prior to the bubble. In Los Angeles, for example, home prices more than doubled relative to income between 2000 and 2006, Fiserv says. Currently, homes in the Los Angeles market are only 25% more expensive than they were in 2000, representing a closer return to pre-bubble levels and a substantial improvement in affordability. "The Fiserv Case-Shiller Home Price Index numbers continued to show falling home values in sand states such as California and Florida," says David Stiff, chief economist, Fiserv. "But there is a silver lining in the cloud of rapidly falling prices. Housing affordability is quickly being restored in many markets, and the pool of buyers who can afford to purchase homes is increasing at a rate not seen in recent years, setting the stage for home-price stabilization." Fiserv forecasts that national home prices will drop another 11% over the next year, eventually bottoming out in early 2010, Stiff adds. "While affordability has been or will shortly be restored in most markets, it must be noted that the recovery in home prices will be tentative and weak," he says. Borrowers may be lacking confidence to buy homes in a badly performing economy, and those consumers who are confident their jobs are secure may not have access to credit, Stiff says. Also, REO inventories will continue to have a drag on prices. According to Fiserv, home-price declines remained sharp across California, Arizona and Florida, while other metro areas showed smaller declines and are better positioned for recovery. One-time bubble markets in Florida, California and Arizona, which have already seen home values fall 40% to 50% since prices peaked in 2006, are showing no sign of moderation in declining prices. Additionally, the index finds that Salt Lake City, which had largely been spared falling home values over the past three years, saw average home prices drop almost 5% over the last year. Home values there are projected to fall an additional 12.5% over the next year. SOURCE:

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