Optimism that a sustainable economic recovery is underway is driving increases in home prices across many U.S. metro areas according to an analysis of fourth quarter 2009 prices in 384 metro markets by Fiserv, the leading global provider of financial services technology solutions, and data from the Federal Housing Finance Agency (FHFA).
Home prices were trending up in 155 out of 384 metro areas, including markets in California, Ohio, Michigan and Washington, D.C.
Year-over-year prices are up in 8 of 28 California metro areas and prices have increased from recent lows in 24 of 28 metro areas. The strongest rebounds were in coastal markets, including the Bay Area, Los Angeles, Orange County and San Diego, where there are decreasing levels of foreclosed homes. Markets in the interior have also experienced a price bounce, mainly due to strong investor demand.
In Washington, D.C., home prices were up 5.2 percent year-over-year. Since the market bottom in early 2009, prices in this metro area have risen more than 9 percent.
Ohio and Michigan, two states hit hard by the recession and loss of manufacturing jobs, are seeing signs of stabilization.
Other markets where investor purchases of foreclosed homes have dominated housing sales are also coming back into balance. This includes metro areas such as Minneapolis, Detroit and Memphis, Tenn., where recent sales have included more regular, non-distressed homes.
“Optimism that a sustainable economic recovery is underway is driving increases in home prices across many U.S. metro areas. More and more, consumers have confidence that buying a home doesn’t mean catching a falling knife,” said David Stiff, chief economist, Fiserv. “Very large price declines have also made housing much more affordable, drawing in both first-time homebuyers and investors.”
Despite the positive performance in these regional markets from recent lows, average U.S. home prices were down 2.5 percent from the year-ago quarter, which can be attributed to the continued high level of unemployment, rising interest rates and the large number of distressed properties that remain in markets such as Florida, Arizona and Nevada.
However, Stiff warns there will be renewed downward pressure on home prices. “The first-time homebuyer tax credit has expired, the Federal Reserve has stopped buying residential mortgage backed securities (MBS) and the projected number of foreclosures remains extremely high. As a result, markets with recent price increases may see small price declines before prices finally stabilize at the end of this year or early 2011.”
Over the past year, the U.S. housing market continued its price correction, with single-family home prices across the U.S. falling an average of 2.5 percent over the 12-month period ending December 31, 2009. The Fiserv Case-Shiller Indexes forecast that average single-family home prices will fall another 3.1 percent over the next 12 months. Steep home price declines are expected to continue in markets that have been hurt most by the housing crisis. From the fourth quarter of 2009 through the fourth quarter of 2010, average home prices in Nevada, Arizona and Florida are projected to decline 9.2 percent, 9.5 percent and 7.7 percent, respectively.