By JANNA HERRON and MICHELLE CONLIN
NEW YORK – Millions of foreclosures and weak demand from buyers are forcing home prices down in most major U.S. cities.
Prices are falling even in places like San Francisco and San Diego, which had posted strong increases just a few months ago. Analysts say many markets won’t improve until they see fewer foreclosures and more job gains.
“Unemployment is still high, people are afraid of losing their homes and credit is hard to get,” said Maureen Maitland, vice president of Standard & Poor’s indices.
A report Tuesday underscored the weakness. Home prices declined in 18 of the 20 cities, according to the S&P/Case-Shiller 20-city index. Prices fell 0.7 percent in September from August, marking the second straight monthly drop.
A separate report Tuesday showed Americans are gaining more confidence in the broader economy. The Conference Board, a private research group based in New York, said consumer confidence rose to a five-month high in November.
Still, the housing market remains depressed.
The biggest weight on prices going forward is foreclosures, which sell at steep discounts and lower nearby property values. About 2 million loans are in foreclosure, and another 2.4 million borrowers have missed at least 90 days of mortgage payments, according to LPS Applied Analytics.
Foreclosed properties and other distressed sales are dominating the Tampa, Fla., market, said Stephanie LeFew, owner of Tampa Home Buy Realty. The number of homes there that received a foreclosure notice rose 7 percent in the July-September quarter from the previous quarter, according to foreclosure tracker RealtyTrac Inc.
“Buyers are getting discounts of 50 percent and more,” LeFew said.
Prices there hit their lowest point since 2003, dropping 0.8 percent in September from August, according to the Case-Shiller index. The median price in Tampa was $115,700 in the third quarter, according to Internet real estate service Zillow.
Miami and Phoenix are also being greatly affected by foreclosures. One in every 41 Miami households received a foreclosure filing in the July-September quarter. Home prices there declined 1.2 percent from August to September.
In Phoenix, the foreclosure rate was one in 44 in the July-September quarter; home prices fell 1.5 percent from August to September.
Las Vegas has the nation’s worst foreclosure rate. One in every 25 households received a foreclosure filing in the July-September quarter.
Still, the city is beginning to show signs of stabilizing. For the second consecutive month, home prices ticked up 0.1 percent, according to the Case-Shiller report. Buyers are taking advantage of prices that are now more than 50 percent below their peak from four years ago.
“We’re seeing retirees from California and New York especially, buying homes with cash,” said Steve Harless of Realty One Group.
Washington was the only other city to post an increase month over month in the Case-Shiller index. The nation’s capital has had fewer foreclosures and one of the best economies. The metro area added 56,100 jobs in September from a year earlier, the largest gain in the nation.
The outlook for California’s cities is more mixed. Three California cities in the Case-Shiller index – Los Angeles, San Diego and San Francisco – have seen home prices rebound sharply in the last year.
Yet, prices have softened in the last two months in those cities. Demand has weakened since federal home-buying tax credits expired in the spring. The Case-Shiller index is a moving, three-month average. The September figures are comprised of prices in July, August and September, so it would be the first month to show the full impact of the end of the tax credits.
“It doesn’t surprise me. The market around here in the spring was quite strong. You could almost call it hot. Now I actually have noticed there’s definitely a slowdown going on right now in real time,” Darin DeRenzis, a partner with L.A.-based Peninsula Sotheby’s International Realty.
The absence of the tax credit is having an impact on lower-priced markets too, where it was a bigger financial help, said Zach Pandl, an analyst at Nomura Securities.
Cleveland and Minneapolis recorded the largest monthly declines in September after posting sharp increases in prices during the life of the tax credits. The median value of a Cleveland home was $118,500 in the third quarter and $177,200 for Minneapolis, versus the national median of $179,900, according to Zillow.
Home prices have fallen in 15 of the 20 cities in the past year. The 20-city index has risen 5.9 percent from its April 2009 bottom. But it remains nearly 28.6 percent below its July 2006 peak.
The national quarterly index, which measures home prices in the nine U.S. census regions, dropped 2 percent in the third quarter from the previous quarter.
“The question is how fast is the local economy growing and what is the extent of foreclosures in that area,” Pandl said. “But really, it is a national phenomenon.”
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