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Median Home Price Falls 7.7%

Posted on: Wednesday, 14 May 2008, 06:00 CDT

By Stephanie Armour

Median home prices fell broadly in the first quarter of the year, spreading to such cities as Dallas, Seattle and Raleigh, N.C., that had largely weathered the national housing slump.

The median price of an existing single-family home -- the point at which half cost more and half cost less -- fell in 100 of the 149 metro areas reviewed by the National Association of Realtors, which issued its first-quarter report Tuesday. The median price rose in 48 metro areas and was unchanged in one. The percentage of areas that saw price declines -- 67% -- was the highest since the NAR began such record-keeping in 1979.

Nationally, the median U.S. home price tumbled 7.7%, from $212,600 in the first quarter of 2007 to $196,300 in the first quarter of this year. That was also the biggest percentage drop on record.

The fall in prices is further evidence of a deep housing recession that has pushed down home sales across the country.

"The national housing market shows no sign of a bottom," says Mark Zandi, chief economist of Moody's Economy.com.

"Sales, construction and prices are falling in most places across the country. The worst of the price declines are occurring where speculation, subprime lending and overbuilding were most prevalent. But no corner of the country is immune from the price declines."

The biggest drops were seen in the West, where median prices of single-family homes plunged 12.3% from the first quarter of 2007, to $296,300. In the Midwest, prices fell 7.9%, to $142,700.

Some price drops were severe, with double-digit percentage declines in such cities as Akron, Ohio, Grand Rapids, Mich., and many cities in California, including the Sacramento area.

Significant price declines occurred largely in urban areas where subprime lending was more common and prices had experienced sharp run-ups during the boom that largely came to a halt in 2006. Though subprime loans -- for people with shaky credit -- account for less than 10% of mortgages, they make up more than half of all foreclosures, the NAR says.

Subprime loans often impose higher rates, penalties for refinancing and mortgage payments that rise steeply once adjustable-rate loans reset. One in five subprime mortgages is expected to wind up in foreclosure, according to the Center for Responsible Lending.

But those who bought homes years before the slump in many cases are still seeing equity gains. The median rise in value for sellers who bought a home in the first quarter of 2002 is 24%; the median equity accumulation is $37,700.

Still, the drop in prices is causing worries for many homeowners. Some are "upside down" on their mortgage: They owe more than their home is worth.

"If you're upside down, you can't refinance, and you can't move," says Deede Wockenfuss, a marketing manager in Gilbert, Ariz., for Assist 2 Sell, which provides real estate services on a fee basis. "People are coming to me and saying, 'Please tell me what to do.'" (c) Copyright 2008 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

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