US Home Prices Declined as Foreclosed Home Listings Grew
July 23rd, 2009 by 
Joseph Smith
Home prices nationwide declined in May by 5.6 percent from May last year as foreclosed home listings continued to grow in many areas of the country, based on a report from the U.S. Federal Housing Finance Agency.
But the May home price decline was the smallest decline in ten months on a year-over-year basis, possibly signaling the start of a recovery in the housing sector. Housing analysts expected home prices to drop by 0.2 percent in May, based on the median of price estimates by the analysts.
However, compared to April, May home prices increased by 0.9 percent, with five regions posting price increases from April levels.
But the continued upward jump of the unemployment rate and growth of foreclosed home listings pushed down home prices. According to the Standard & Poor’s/Case-Shiller index, home prices fell by 33 percent compared to the peak home price in July 2006. Unemployment hit 9.4 percent in May, pushing more than 321,000 households to default in May. One household out of every 398 households was hit with a default or foreclosure action in May, with more than 65,000 already in bank foreclosed home listings.
In June, the unemployment rate further jumped to 9.5 percent, the highest level reached since 1983. According to Labor Department data, around 6.5 million jobs has been wiped out since December 2007, the month identified by economists as the start of the recession.
In April this year, home prices declined by 18.1 percent from April 2008 in 20 major metro areas, based on data from the Standard & Poor’s/Case-Shiller index.
To help American homeowners cope with the unemployment and foreclosure rate and to encourage buyers to buy from foreclosed home listings, the Federal Reserve continued to purchase mortgage-backed securities in an effort to push down mortgage rates to their lowest levels in April.
In May and in June, mortgage rates had upticks but these increases slowed, putting rates to 5.14 last week, down from the 5.59 peak in June and from the 5.2 level the previous week.
Meanwhile, the nationwide default rate increased in the first quarter to an adjusted rate of 9.12 percent and the percentage of homes getting added to foreclosed home listings increased to 1.37 percent, based on MBA data.
According to MBA chief economist Jay Brinkmann, one out of every 8 Americans is currently in default on a mortgage payment or has a house already added to foreclosed home listings.
