U.S. home prices plummeted at the end of last year, and bank seizures of property nearly doubled in January, indicating that the housing slump is deepening.
Home prices suffered their biggest fourth-quarter drop since 1991, the Office of Federal Housing Enterprise Oversight said. The S&P/Case-Shiller home-price index showed prices in 20 metro areas fell in December by the most on record. Repossessions rose 90% to 45,327 last month from the same period a year ago, RealtyTrac reported.
"All the news we're getting is pretty dark," said Celia Chen, director of housing economics for Moody's Economy.com. "Prices will continue to fall for the rest of this year because increasing foreclosures in turn increase inventories."
The worst housing decline in more than two decades means that buyers are finding it tougher to get mortgages, and foreclosures expand the glut of unsold homes. Banks may sell up to 1 million repossessed properties this year, forcing prices down further, said Rick Sharga, RealtyTrac's executive vice president.
President Bush's proposal to help 1 million subprime borrowers avoid foreclosure with tax-exempt bonds is doing little to slow the increase in defaults.
State housing agencies are turning away applicants because their homes have lost too much value or they've piled up too much debt, according to estimates from Geoffrey Cooper, emerging markets director at a unit of MGIC Investment, the nation's biggest mortgage insurer.
Total foreclosure filings in January, which include default and auction notices as well as bank seizures, rose 57%, RealtyTrac said. More than 233,000 properties were in default or foreclosure last month. Total filings were up 8% in January from December, RealtyTrac said. More than 1% of U.S. households were in some stage of foreclosure during 2007.
Seasonally adjusted prices for existing single-family homes in the quarter dropped 1.3% from the previous three months, OFHEO said. Prices fell 0.3% from the second to the third quarter of 2007, OFHEO said.
"A lot of buyers are simply locked out of the market because lending standards have really tightened in the past four months," said Delores Conway, director of the Casden Economic Forecast at the University of Southern California Lusk Center for Real Estate. "The no-down payment loans have disappeared. People have to put money down now. It's back to basics."
California, with an index price decline of 6.6%, led all states, OFHEO said. It was followed by Nevada (-5.9%), Florida (-4.7%) and Michigan (-4.3%). All 20 metro areas with the greatest price declines in 2007 were in those four states. The seasonally adjusted price for existing single-family homes in December fell to $221,100, down 1% from a year earlier, OFHEO says.
The S&P/Case-Shiller home-price index dropped 9.1% from December 2006, after a 7.7% drop in November. Nationwide, home prices fell 8.9% in the fourth quarter from a year earlier, the biggest decline in 20 years of record keeping. December's drop was the 12th in a row.
"It's inevitable that prices will decline a lot more in 2008 because inventory is so high," says Patrick Newport, an economist at Global Insight.