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Study: House prices fall, and sales fall faster

Home prices continued to fall in the first three months of this year compared to the same time last year, and the number of houses resold declined even more sharply, according to the National Association of Realtors.

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The Realtors' economist predicts that the market will turn around in the second half of the year.

"Essentially, we see that the existing-home market is stabilizing in a broad cyclical trough and moving in the right direction, with a modest gain from the fourth quarter," senior economist Lawrence Yun says in a news release. "Conditions changed fairly rapidly during the boom, but we need more patience now to see a slow, gradual recovery, which should start in the second half of this year."

Yun defines "the right direction" as an upward movement in prices. Naturally, first-time buyers will disagree.

Houses and condominium units were resold at a seasonally adjusted annual rate of 6.41 million units in the first three months of this year. That's down 6.6 percent from the sales rate in the first quarter of 2006, and down slightly from the 6.48 million units that were resold in all of 2006.

Evidently, homeowners have been reluctant to deal, as prices fell more slowly than the number of units sold. In the first quarter of this year, half the houses were sold for more than $212,300, or 1.8 percent below the median price of $216,100 in the first quarter of 2006.

The decline is sharper when you look at the median price for all of 2006: $221,900. The median price in the first quarter of this year was 4.3 percent below that.

Median prices have fallen three quarters in a row, and they fall faster each quarter, like a bullet dropped from the top of the Empire State Building. The median price in the first quarter this year was 3.1 percent below the median price in the final three months of 2006.

The National Association of Realtors explains that "there is a downward skew" in the price data "because sales have shifted away from many high-cost areas." In the year ending in March, sales were down more than 25 percent in higher-priced Nevada, Hawaii and Florida, as sales were up in lower-price areas such as Wyoming, Arkansas and Iowa.

Prices have been relatively flat in Lexington, Ky., where a Bankrate reader named Aaron is about to close on a $121,500 house. That's about $26,000 below the median price for the Lexington metro area. He is getting a loan for 100 percent of the home's price.

"I was mildly concerned about market conditions, but based on the relatively stable market here, I didn't let the market keep me up at night," Aaron says in an e-mail. He is getting married this summer, and after the couple pay their wedding-related expenses, they will plunk down a few thousand dollars toward principal, building some equity. They plan to pay an extra $100 or so toward principal every month.

"I don't envision staying at this house for more than several years, so naturally I would like to come out ahead (at least match inflation) when I sell the house," Aaron says.

Even though prices fell faster in the first quarter than they did in the previous two quarters, the NAR says it is encouraged by "a flattening in home prices."

"It appears that the worst of the price correction is behind us," says Pat V. Combs, president of the trade association. "More stable home prices and declining mortgage interest rates are increasing buying power, which should encourage potential buyers who've been on the sidelines."

The most expensive housing in the first quarter was in the Silicon Valley in Northern California, with a median price of $788,000. Prices there were up about 4 percent from the previous quarter and from the first quarter of 2006. The second most expensive area was up the peninsula in San Francisco and Oakland, with a median price of $748,100. The most expensive metro area outside California was the Golden State's playground, Honolulu, where the median price was $620,000.

The least expensive metro area was Elmira, N.Y., where half the houses sold for less than $75,300. It was followed by Decatur, Ill., with a median price of $76,200, and the Youngstown, Ohio, area, at $78,300.

As far as price gains go, the biggest year-over-year increase was in the Cumberland, Md., metro area, where the median price was $100,000, or 17 percent higher than the $85,400 median price in the first quarter of 2006. Beaumont-Port Arthur, Texas, came next, with the median price rising 16.5 percent in a year, and Gulfport-Biloxi, Miss., where the median price advanced 15.7 percent.

The biggest price decline was in the aforementioned Elmira, N.Y., down 14.9 percent compared to a year before. Year-over-year median prices fell 12 percent in the Sarasota-Bradenton, Fla., metro area, and 10.9 percent in New Orleans.

See the detailed market-by-market numbers.

 
 
Next: See how home values fared in your area.
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