Home Price Monitor: October 2011

by: NATIONAL ASSOCIATION of REALTORS®

The Home Price Monitor Series reviews national home prices by examining several widely cited national measurements. It is released monthly and allows REALTORS® to gain insight into the recent performance of national prices, factors affecting that performance, and the likely direction of prices in the months ahead. The Home Price Monitor includes the same data covered in the national media that clients will expect their REALTORS® to know and be able to comment on and provides different, more complete coverage of the information all in one place.

Highlights:

• While month to month home prices in August were roughly stable, the end of the summer selling season led to a typical seasonal decline in September among currently available price measures. This seasonal decline generally continues through February.

• Compared to one year ago, however, price change was stable from August to September among existing homes—available data show a 3-4 percent year to year decline in both months—while price change worsened somewhat among new homes.

• Previously, new homes had shown better price performance over the year; August began the sharp reversal of this trend which continued in September. Low levels of new construction and very little activity in the new home sector may be causing substantial volatility in the data. Additionally, the structure of the first-time home buyer tax credit which had conditions on both the contract and closing dates likely led to lingering effects on the new home market. Expect better year over year price change among new homes in October.

Outlook:

• Distressed sales, which hold back existing home prices, continue to comprise about 30 percent of sales—down from nearly 40 percent earlier in the year. However, as housing faces a seasonal slowdown, it is possible that distressed sales as a share of total sales will rise even as the number of distressed sales remains largely constant.

• The increase in the share of distressed sales may bring reported transaction prices down somewhat. Of course, the price reduction depends on the condition of the distressed property. Nearly two-thirds of distressed properties are in average or better-than-average condition which may help to lessen the downward impact on prices.

• Stable-to declining inventories should help to support prices, though buyers searching for the right home may have fewer options from which to choose. Very limited new construction means that buyers initially searching for a new home may find more selection among existing homes.

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