Actions to Foreclose Houses Pushed Down S&P Price Index
May 27th, 2009 by 
Joseph Smith
Continued lender actions to foreclose houses pushed down home prices in March in the Washington, D.C. capital region, based on the Standard & Poor’s/Case-Shiller Home Price Index published on Tuesday. Home price levels in the region declined by 8.4 percent compared to price levels in March 2008.
The home price index, which tracks home prices in 20 major U.S. cities, showed that the housing sector nationwide remains weak as actions to foreclose houses pushed home prices further down.
Housing prices in the capital area did not decline as steeply as in other metropolitan areas, but the area’s decline showed that home price stabilization is still not within reach.
Nationwide, home prices declined by 19.1 percent in the first quarter this year compared to last year’s first quarter. This represented the biggest decline in the index’s 21-year history. Home prices dropped to 2002 levels and fell by 32.2 percent compared to their highest levels in 2006.
Based on the S&P report, nine metro areas posted record-breaking home price decreases in March. Prices declined by over 30 percent in Las Vegas, Phoenix and San Francisco, making them the three worst performing cities in terms of housing sector activity.
The best performing cities were Denver and Dallas, where home prices dropped by only about 5 percent.
Analysts expect home prices to decline further into lower levels across the nation as lenders continue to foreclose houses and as buyers take time in choosing from large inventories of foreclosure homes in the market.
At least three factors are pushing down home prices: lenders’ decision to foreclose houses as borrowers extend the number of months they are in default, continued increase in job cuts and the end of foreclosure moratoriums.
Marc Chandler, chief of currency strategy for Brown Brothers Harriman, said that around $119 billion mortgage loans are already overdue by one month. He estimated that mortgage lenders will foreclose houses at a pace of more than 2 million homes this year, an increase from the 3 million foreclosed units during the two-year period of 2007 to 2008.
Chandler explained that the double trouble of foreclosures and unemployment are too heavy for home price levels to bear.
Another challenge facing the housing sector is the reality that government and nonprofit programs to combat lenders’ decisions to foreclose houses have not made a significant impact. According to a Fitch Ratings report released on Tuesday, about 75 percent of refinanced or modified loans are likely to get delinquent again after just a year due to the still worsening unemployment situation.
