Property values stabilize after surge in home sales

The presence of distressed properties, including foreclosures, short sales and real estate-owned homes, continues to add downward pressure on overall home prices. However, some industry groups argue that prices could be showing signs of stability. According to the most recent FNC Residential Price Index, home prices continued to trend lower during the second half of 2011 as foreclosures were conducted at an elevated rate. As a result, since July 2011, the values of non-distressed properties have declined by roughly 4.5 percent at an average of 1 percent every month. Distressed property sales accounted for an estimated 27 percent of all transactions in February 2012. While this is still an elevated share, it is significantly less than the 32.2 percent share reported a year earlier. At the end of last year, the report noted the median price discount of foreclosures amounted to 18.4 percent, making the prospect of owning a home more affordable to entry-level buyers. While major bargains can still be obtained, the discount was 1.8 percent higher during the previous three-month period and was 1.2 percent higher during the fourth quarter of 2010. However, as these affordable prices continue to attract a significant number of buyers, a recent report from CoreLogic says than an elevated sales rate is working to stabilize home prices. In February, the firm found that overall home prices fell just 0.8 percent, compared to 2 percent just a year earlier. While this figure includes the prices of distressed homes, when excluding these properties, values actually appreciated 0.7 percent in February from the previous month. "The continued strength of sales activity and tightening inventories in many markets are early and hopeful signs that prices will continue to stabilize and improve in the coming months," said CoreLogic president and CEO Anand Nallathambi. "In fact, nondistressed home sale prices, which represent two-thirds of all sales, have appreciated by just over 1 percent since the beginning of the year." While overall home prices continued to edge lower, the pace is much slower than it has been in previous years. As a result, the Mortgage Bankers Association reported an increase in home loan activity during the week ending March 30 of buyer capitalized on bargain prices to become homeowners. The industry group's Weekly Application survey found that application activity surged 4.8 percent from the previous week. In addition, as mortgage rates continue to hover near all-time lows, the refinance share of activity spiked 4 percent. "Applications to buy a home picked up last week, and are running more than 2 percent above the level reported at this time last year," said MBA vice president of research and economics Michael Fratantoni. "Home purchase applications for conventional loans are now about 10 percent above last year’s level. Applications for government loans increased by more than 10 percent over the week, for both purchase and refinance, likely spurred by borrowers seeking to apply before scheduled increases in FHA mortgage insurance premiums at the beginning of April." Meanwhile, in the wake of the surge in application activity, the average interest rate for a 30-year fixed-rate mortgage with a conforming loan balance of less than $417,500 dipped to 4.16 percent. The previous week the rate stood at 4.23 percent. In addition, the report found that the rate for a 30-year FRM jumbo loan also declined, falling to 4.46 percent.