Prices of Homes Including Foreclosed Bank Owned Homes Drop

by Peter Vernon on Foreclosure Crisis

Home prices across the nation fell by a record rate in the first quarter this year compared to last year’s first quarter as banks sold their foreclosed bank owned homes, according to the National Association of Realtors. California and Florida led the other states in home price declines.

The median price for homes dropped to $169,000, a decrease of 14 percent from last year’s first quarter. The median price declined in 134 out of 152 metro areas, with the steepest declines in Fort Myers and Cape Coral in Florida and in San Jose and San Francisco.

Sales of foreclosed bank owned homes and other distressed homes increased in 17 states, compared to last year’s fourth quarter, as first-time home buyers and investors bought foreclosed bank owned homes and other distressed properties. NAR said that foreclosed homes are usually priced at 20 percent below the price levels of other foreclosures homes for sale.

NAR also reported that the inventory of pre-owned houses on the market declined in March to 3.7 million, compared to 3.8 million pre-owned homes in February.

According to data from the Commerce Department, the inventory of new houses for sale dropped to 311,000 units, the lowest count since January 2002.

Brian Bethune, an economist at Massachusetts-based IHS Global Insight, said there are many forces pushing the housing market in opposite directions. Rising affordability and record low mortgage rates are enticing first-time home buyers, but job losses and foreclosures are pushing down home prices to levels that are hurting the housing market.

Total sales for existing homes fell by 6.8 percent compared to last year’s first quarter to 4.59 million housing units in an adjusted yearly rate. Sales, including sales of condos, co-ops and single-family houses, declined by 3.2 percent compared to last year’s fourth quarter.

NAR’s chief economist Lawrence Yun, said that the elements and geographical areas of the housing market show different directions, with short sales, sales of new homes and sales of foreclosed bank owned homes varying in market performance.

Yun has observed that in places with the largest price declines, sales of foreclosed bank owned homes and other distressed properties are also higher, distorting market data.

NAR estimated that sales of pre-owned homes, including foreclosed bank owned homes, will increase to 4.97 million units in 2009 from a total of 4.91 million units last year.

Meanwhile, HUD Secretary Shaun Donovan reported that U.S. banks have $26.6 billion worth of foreclosed bank owned properties as of December 2008, more than twice the figures in December 2007, using data from the Federal Deposit Insurance Corp.

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