Home Prices Decline in One Third of U.S. Metro Areas (Update3)
By Kathleen M. Howley
Nov. 21 (Bloomberg) -- Home prices fell in one third of U.S. cities last quarter as stricter lending standards caused a 14 percent decline in sales nationwide.
Prices dropped in 54 of 150 metropolitan areas in the third quarter and the median sales price tumbled 2 percent nationwide, the National Association of Realtors said today. Home sales, including single-family properties and condominiums, slid to 5.42 million at an annualized pace from 6.29 million a year ago.
Declines in sales and prices signal the housing slump that began in 2006 may extend into its third year, matching the slowdown 18 years ago that ended in the 1991 recession. The housing decline will reduce gross domestic product growth to 2.1 percent in 2007 from 2.9 percent a year ago, according to Lawrence Yun, an economist for the Chicago-based trade group.
Ninety-three U.S. cities had price gains and three were unchanged from a year ago, according to the report.
The U.S. median home price, the point at which half the homes sold for more and half for less, was $220,800 in the third quarter, down from $225,300 a year ago, the association said. In the second quarter, prices fell in 50 of 149 cities and the national median dipped 1.5 percent.
Palm Bay, Florida, had the biggest price decline in the third quarter, tumbling 12.4 percent from a year earlier. Sacramento, California, fell 10.5 percent and Sarasota, Florida, dropped 10.4 percent.
Foreclosures Rise
The largest price increase was in Bismarck, North Dakota, up 15.1 percent from a year ago, followed by Salt Lake City, with a gain of 14.1 percent, and Yakima, Washington, up 13.6 percent.
Home sales fell in the District of Columbia and all the 48 U.S. states covered by the report. Data was not available for New Hampshire and Idaho, the trade group said.
Nevada led the sales drop, with a decline of 35 percent from a year ago. Florida was second, falling 32 percent, followed by Arizona, down 31 percent.
The U.S. residential real estate market is faltering as rising foreclosures among subprime borrowers have pushed down prices and led to a record supply of unsold homes. Foreclosures among homeowners with subprime adjustable rate mortgages have reached a five-year high.
The collapse of the market for bonds backed by mortgages has spurred U.S. banks to take more than $45 billion in writedowns and tighten their lending standards. Fewer mortgages and falling prices have made it harder to refinance or sell.
Tighter Standards
About 40 percent of U.S. lenders have raised their standards on mortgages for prime borrowers, their most creditworthy customers, according to a Federal Reserve survey published Nov. 5. In a July survey, 15 percent reported raising their standards for prime borrowers.
About 60 percent of lenders who give non-traditional loans, which include interest-only mortgages, reported stricter lending standards, up from 40 percent in July, the Federal Reserve said.
The home loan market may be further constrained after Freddie Mac, the second-largest U.S. mortgage finance company, reported its biggest quarterly loss yesterday and said it may need to raise as much as $6 billion to bolster its capital.
The troubles at Freddie Mac and Fannie Mae may leave them with less money to buy new mortgages. The companies, created by Congress to foster American home ownership, own or guarantee 40 percent of the $11.5 trillion U.S. residential mortgage market.
Federal Reserve policy makers and economists have expressed concern the housing slump and credit-market losses may lead to a recession. Fed officials lowered their growth forecast in October and predicted economic growth could slow next year to as low as 1.8 percent.
To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net . Last Updated: November 21, 2007 11:57 EST
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