It's official. Home prices have double dipped
nationwide, now lower than their March 2009 trough, according to a new report from Clear Capital. Sales of bank-owned (REO) properties hit 34.5 percent of the market, according to the survey, resulting in a national price drop of 4.9 percent quarterly and 5 percent year-over-year. National home prices have fallen 11.5 percent in the past nine months, a rate not seen since 2008. Add short sales, where the bank allows the borrower to sell for less than the value of the mortgage, and prices have nowhere to go but down.
While the usual subprime mortgage suspects, like California, Arizona, Florida and Nevada used to rule the foreclosure roost and still have high volumes of distressed properties, the mid-west is seeing a surge in REOs now, thanks to the plain old recession. 40 percent of the Chicago market is foreclosures, 43 percent in Cleveland and 51 percent in Minneapolis. Home prices fell 8.7 percent in the Mid-West during the past three months compared to the previous quarter.
While the foreclosure crisis is abating on the front end, with fewer loans going newly delinquent, the pipeline of seriously delinquent loans is enormous
. Banks are now ramping up the foreclosure process after the "robo-signing" paperwork scandal, but at their current pace it would take about four years to process all the bad loans through foreclosure and even longer to sell those homes out on the open market
. While buyer demand is rising, thanks to a slowly improving jobs picture, mortgage availability
is still very difficult for the low to middle-income borrower, and falling prices don't help already weak consumer confidence
in the housing market. If prices continue to fall further, which they likely will in the short term, the number of so-called "underwater" borrowers, those with negative equity, will rise even higher, which could in turn result in more loan delinquencies.
Nationwide more than a quarter of all homeowners with a mortgage are in a negative equity position, but in some markets, that number is far higher. 46 percent of Massachusetts borrowers are underwater
, according to LendingTree.
The last time home prices fell at this rate, three years ago, they were then boosted by government stimulus in the form of a home buyer tax credit. "A note of caution to those looking for a strong end to 2011: The last time no incentives were in place and distressed inventories were this high, home prices fell sharply," warns [clear capital's alex] Villacorta.