Home prices rise 0.2% in third quarter after two years of depreciation, study says
After two years of depreciation, home prices edged up 0.2% in the third quarter compared with the previous quarter, according to a report released today.
California led the way with a 2.1% increase, according to data compiled by forecasting and research group IHS Global Insight and PNC Financial Services Group. Prices still dropped in 161 of the 330 metropolitan areas studied, but the number was far fewer than the 317 areas that posted declines in the fourth quarter of 2008.
The areas included in the report account for nearly 79% of all existing homes in the country.
The average nationwide price is down 10.7% from its peak in spring 2007. In the first increase since then, prices jumped 0.9% during the third quarter compared with a year earlier, according to the Federal Housing Finance Agency.
Los Angeles and Miami both had gains above 4%. But eight areas have seen their prices plunge more than 50% since reaching peak prices, including Merced, which has dropped 66%. Three others in the Central Valley have seen similar dives.
In all, prices in 128 areas have slid more than 10% from their highest points.
The largest declines in the third quarter were in Bend, Ore., with a 5.6% fall, and Las Vegas, with a 5% slump. Bend’s prices are now 33.5% below their peak in 2006, and prices in Las Vegas have dropped 56% overall.But according to the study, no metropolitan areas were extremely overvalued, a sharp difference from 2005, when 52 were priced too high. Overall, the country’s housing market is slightly undervalued.
California and Florida have morphed from extremely overvalued to undervalued as prices over the last two years have plummeted, pushed by a flood of foreclosures and short sales and a massive inventory of unsold homes.
In the third quarter of 2006, the Los Angeles area was 56% overvalued with an average $547,500 price tag. But in the most recent quarter, the region was 1.4% undervalued with an average home price of $368,000. In the same period, the average Orange County price dropped from $635,900 to $469,300.
When weighted by market value, the national market is 8.6% undervalued, down from a 26.1% overvaluation peak in the second quarter of 2006, according to the study. When weighted by housing units, the market is 10.1% undervalued, compared with a 17.1% overvaluation peak, also in the second quarter of 2006.
Though 105 metropolitan areas were considered undervalued in the third quarter, 70% of them saw the amount of undervaluation drop, according to the report. In California, Oxnard improved 4.4%, Oakland jumped 3.6%, San Francisco rose 3.4% and Riverside lifted itself 2.8%.Most overvalued housing markets are still in the Pacific Northwest, though prices are sliding there.
But authors of the study stressed that the market may not yet be on the mend, with unemployment flitting around 10% and potentially misleading and temporary boosters such as a federal tax credit for first-time buyers.
-- Tiffany Hsu
Photo credit: Tim Rue / Bloomberg News