The real estate roller-coaster ride continued last year as the median price of U.S. single-family home plunged 11.9% to $173,200.
The housing situation had been looking up earlier in the year, with prices gaining ground in the first nine months. But the increases weren't enough to push the median home price above 2008's bar of $196,600, according to the National Association of Realtors.
And then, prices fell in the fourth quarter, dropping 2.9% compared to the previous three months and 4.1% compared to the last quarter of 2008.
Still, the quarter-over-quarter drop was encouraging to NAR, which tracks home prices and sales.
"This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices," said Lawrence Yun, NAR's chief economist. "Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
Another sign of improvement is the increase in the number of homes sold. More than 6 million homes changed hands between October and December -- a 27.2% increase from the same time period in 2008.
"The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates," said Yun. "With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices."
Michelle Meyer, Barclay Capital's economist for new home construction, is predicting continued price declines through early 2010. By the second quarter, however, she expects an upturn.
She thinks that as the
homebuyer tax credit expires at the end of April, it will add volatility to the market during the second quarter. People will rush to get in under the wire, boosting volume and shoring up prices.
After that, markets will moderate, with few showing any substantial increases.
On the other hand, David Crowe, chief economist with the National Association of Home Builders, said he expects home prices "will moderate and stay where they are" for a long stretch.
Volume up nearly all across the board
Sales volume increased in all but two states; 32 states recorded double-digit homes sales gains.
Foreclosure sales continued to drive these increases; distressed properties, which includes foreclosures and short sales, accounted for 32% of sales during the quarter.
Mike Larson, a real estate analyst for Weiss Research, attributed the pop in volume to low prices. "People are simply finding that houses are cheap again," he said.
Crowe said the increase in sales volume was no surprise even though job losses continued to mount during the quarter.
"It's not unusual for housing to pick up before unemployment does," he said. "That's the normal pattern coming out of a recession. Mortgage rates are low; home prices are low and have stopped dropping. There's three years of pent-up demand and people who are working are buying homes."
More than a third of the 151 metropolitan areas covered in the report recorded year-over-year home price increases for the quarter, led by Saginaw, Mich., where prices grew 53.5% to $67,400.
The Midwest, which boasts the lowest average home prices of any of the four U.S. regions, was the only area that recorded a price rise over the previous quarter -- a mere 1.1%. The Northeast (-5.6%), South (-2.4%) and West (-8.9%) all suffered losses.
The biggest price drop was in Ocala, Fla, where home value plunged 23.4% to $93,200. In Las Vegas, where foreclosure has hit harder than anywhere else, prices dropped 23.3%.
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