Home prices tumbling

HOUSING: Los Angeles area shows slight dip compared to most major U.S. cities.

A surplus inventory caused by a wave of foreclosures is driving down home prices in major U.S. cities to levels last seen in 2002, although Los Angeles is faring better than most other cities, a research firm said Tuesday.

Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor's/Case-Shiller 20-city index. The damage has now gone well beyond cities hit hardest by unemployment and foreclosures, such as Phoenix and Las Vegas.

Nationally, prices fell 4.2 percent in the first quarter, following a 3.6 percent drop in the fourth quarter of 2010, according to the study. Prices also were down 5.1 percent from a year earlier.

But the declines were narrower in Los Angeles, which was among the first markets to feel the effects of the mortgage meltdown and has already experienced much of the pain.

Prices in metro Los Angeles, which includes Orange County, slipped 0.3 percent in the first quarter, following a decline of 1 percent in the previous three months. Prices were also 1.7 percent below the first-quarter levels of 2010, the company said.

"The real estate (adage) `location, location, location' is really coming back," said David M. Blitzer, chairman of the Index Committee at S&P Indices. "That's one of the few encouraging things I can see."

According to the Valley Economic Research Center at California State University, Northridge, the median home price was $399,500 last month, up 4

percent from the previous month. The study covers the area from Calabasas to Glendale, a larger market than the the region surveyed by the Southland Regional Association of Realtors, which said the median price of a Valley home fell 6percent to $354,900 last month.

But 12 of the 20 areas tracked by Case-Shiller slipped under their prior lows after the price bubble burst in 2006 and the nation sank into recession.

And after adjusting for inflation, the home-price index has sunk to the level of 1999.

The latest report points to a "double dip in home prices across much of the nation," Blitzer said.

The Case-Shiller Index, which covers metro areas that include about 70 percent of U.S. households, is updated every quarter and provides a three-month average. The March data is the latest available.

According to the report, foreclosures in other parts of the country have forced prices down so much that some middle-class neighborhoods have turned into lower-income areas within months.

The overall index fell for the eighth consecutive month and has dropped 3.6 percent in the last year. A temporary federal homebuyers tax credit last summer resulted in a rise in prices that have since tumbled 7 percent.

"Excluding the results of that policy, there has been no recovery or even stabilization in home prices during or after the recent recession," Blitzer wrote in his first-quarter analysis.

Prices are expected to keep falling until the glut of foreclosures for sale is reduced, companies start hiring in greater force, banks ease lending rules and more people think it makes sense again to buy a house. In some markets, that could take years.

"Folks are having so much difficulty in getting financing for a home," said Mark Vitner, senior economist at Wells Fargo. "And foreclosures will likely bring about a third dip. It may be early next year before prices hit bottom."

That's not attractive to potential buyers, who are now probably waiting to see how far prices do fall, Blitzer said.

"We need ... more generous lenders. They don't like making loans, and that's about the size of it," he said.

Nima Nattagh, vice president of research and development at First American Data Tree, which provides information to the lending industry, said it is going to take time for the housing market to right itself."

"I think the shadow inventory (of foreclosures) is the big unknown," Nattagh said. "That means the market is on hold. The banks don't know what to do with the shadow inventory."

Source: http://www.dailynews.com/news/ci_18179780?source=rss

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