The housing market is on the right track toward recovery, as the volume of for-sale homes shrinks and homes sell at a faster pace. Still, home prices continued to fall last year in most parts of the country, according to the National Association of Realtors.
The median price of homes sold in the United States fell 4.2 percent in 2011, according to the NAR's quarterly survey.
Prices declined in 118 of the 149 metro areas included in the NAR report. Overall, prices fell in all four U.S. regions.
The biggest drop was in the Northeast, where home values fell 4.6 percent to a median of $229,000 in the fourth quarter of 2011, compared to the final three months of 2010. In the West, homes sold at a median price of $205,200 in the fourth quarter, a decline of 4.2 percent compared to the fourth quarter in 2010. The South saw a decline of 3.8 percent as homes sold for a median price of $146,500 in the fourth quarter. The Midwest fared slightly better than other regions, with prices falling 3.3 percent to a median of $134,100.
"Clearly, the Midwest has the greatest concentration of areas where homebuyers have the strongest purchasing power, followed by the South," says Lawrence Yun, NAR's chief economist. "Metros on the West Coast and along the Northeastern seaboard have generally higher-priced homes, which account for lower affordability."
|Boise City-Nampa, Idaho||-20.2 percent|
|Binghamton, N.Y.||-19.4 percent|
|Allentown-Bethlehem-Easton, Pa.-N.J.||-17.8 percent|
|Atlanta-Sandy Springs-Marietta, Ga.||-17 percent|
|Springfield, Mo.||-15.6 percent|
|Mobile, Ala.||-15.1 percent|
|Edison, N.J.||-14.9 percent|
|Rockford, Ill.||-14.2 percent|
|Milwaukee-Waukesha-West Allis, Wisc.||-14.1 percent|
|Trenton-Ewing, N.J.||-13.8 percent|
The area with the biggest decline in prices in the fourth quarter was Boise City-Nampa in Idaho, where the median price declined 20.2 percent in 2011. Next was Binghamton, N.Y., with a 19.4 percent decline. The median price is the midpoint, where half of homes sell for a higher price.
Despite the decline in home values, the latest Realtors report brings good news. In the last three months of the year, home sales increased, and fewer homes were on the market for sale. That's a sign that the gap is narrowing between the supply of homes for sale and demand from buyers. A rough balance between buyers and sellers is a key element for a healthy market.
Total existing home sales increased in the last quarter of 2011 by 9.2 percent compared to the last quarter of 2010. There were 2.38 million existing homes available for sale at the end of 2011. That's 21.2 percent lower than the inventory of homes available for sale at the end of 2010.
"Sales have risen strongly in lower price ranges from one year ago, while sales at the upper end remain sluggish," Yun says. "More importantly, we're seeing a consistent trend of declining inventory, which means supply-and-demand conditions are becoming more balanced in more areas, which will help stabilize home prices."
|Cape Coral-Fort Myers, Fla.||25.6 percent|
|Abilene, Texas||16 percent|
|Yakima, Wash.||11.4 percent|
|Kankakee-Bradley, Ill.||10 percent|
|Grand Rapids, Mich.||9.8 percent|
|Palm Bay-Melbourne-Titusville, Fla.||8.3 percent|
|Waterloo-Cedar Falls, Iowa||6.4 percent|
|Bismarck, N.D.||5.3 percent|
|South Bend-Mishawaka, Ind.||4.3 percent|
|Spartanburg, S.C.||4.1 percent|
Joan Psarros, a Realtor at Southern Premier Realty in Cape Coral, Fla., agrees that the decline in inventory of homes for sale is a key indicator of a market that is near or at bottom. She works in the area that saw the biggest jump in home prices in 2011. The Cape Coral-Fort Myers, Fla., area experienced a 25.6 percent increase in home values in the last three months of 2011 compared to the same period a year earlier, according to the NAR.
"There is a big reason for that," Psarros says. "When the market went down, (the Cape Coral market) went down hard and fast."
Prices tumbled. But starting in November, Psarros says, it became noticeable that homes were selling fast. The inventory of homes for sale started to shrink.
"Now we're running out of inventory" and buyers are competing for properties, she says.
The NAR report shows that 29 metro areas nationwide experienced a jump in home prices.
About 30 percent of the homes sold in the fourth quarter of 2011 were distressed properties, which are foreclosures and short sales. In the fourth quarter of 2010, about 34 percent of the homes sold were distressed. The distressed homes sold at discounts averaging 15 percent to 20 percent in the last quarter.
First-time buyers purchased 33 percent of homes sold in the fourth quarter of 2011; they were 32 percent in both the third quarter and the fourth quarter of 2010. About 29 percent of the homes sold were purchased by cash buyers. Investors account for the bulk of the cash purchases. They account for 20 percent of the homes sold in the last quarter.