It’s official. Home prices in three major real estate markets have been declared stabilized by the authoritative Fiserv Case-Shiller Indexes and six more are in the offing.
After five years of falling prices, markets are now beginning to stabilize, largely as a result of improved affordability. In the third quarter of 2010, U.S. single-family home prices saw an average decrease of just 1.5 percent over the year-ago quarter, as a growing number of metro area housing markets begin to stabilize after five years of record home price declines. Fiserv and Moody’s Analytics report that home prices have already leveled out in one out of four metro areas. The firm estimates that price stability will characterize 75 percent of U.S. metro markets by the end of this year and 100 percent of markets by the end of 2012.
San Diego, Washington, D.C., and San Francisco are the first to see home prices stabilized.
Markets where prices will stabilize by the end of 2011 include Minneapolis, New York City and Portland, Ore. Markets where prices will not stabilize until 2012 include Miami, Phoenix and Las Vegas. Seventy-five percent of U.S. metro areas expected to see stable prices by end of 2011
Even as metro markets stabilize, the Fiserv Case-Shiller data analysis indicates a slow recovery in home prices with many false starts, especially in markets with large amounts of foreclosed properties.
“Large supplies of foreclosed properties will continue to be the biggest downside risk for home prices and metro area housing markets,” said David Stiff, chief economist, Fiserv. “Foreclosure activity declined at the end of 2010, but sales activity of bank-owned homes increased. In bubble and crash markets, the uncertain timing and volume of bank liquidated properties will cause home prices to bounce around their lows for many years.”
Data from the Fiserv Case-Shiller showed that improved housing affordability is luring many buyers into the market, as the huge decline in home prices and low mortgage interest rates have reduced the cost of owning a home to pre-bubble levels. Other factors, however, are dampening demand.
“Since a significant number of households no longer have access to mortgage credit, improving affordability does not necessarily translate into sustained housing demand in every metro market,” added Stiff.
The Fiserv Case-Shiller Indexes forecast that average single-family home prices will fall another 5.5 percent over the next 12 months, with steep home price declines expected to continue in markets that have been hurt most by the housing crisis. These markets, including many in Florida, California, Nevada and Arizona, will begin seeing prices stabilizing throughout this year and through the end of 2012. Factors weighing on the housing market continue to include chronic high unemployment and the large number of distressed properties that remain in many of the bubble markets.