Home Prices Record Drastic Slide
(The housing market has been on a steep downhill slide since the beginning 2006, and everyone now agrees.)
The "cooling" market has been speculated and documented for several months, but now it seems official that the great appreciation seller's market is done.
Realty Times columnist, Broderick Perkins, documents this downfall with new statistical information in his article, "Home Price Appreciation Erosion 'Significant.'"
"The latest major housing market report reveals the level of home price appreciation is shrinking at a rate not seen since 1975."
"On the heels of growing numbers of reports that inventories are rising as home sales are falling, the Office of Federal Housing Enterprise Oversight's Home Price Index for the second quarter 2006, reveals home prices rose 10.06 for the year and only 1.17 percent from the first quarter to the second quarter, for an annualized rate of 4.68 percent."
These figures are noteworthy compared to 2005's home price statistics. Home prices raised an average of 14.04 percent for 2005 and 3.65 percent from the first to the second quarter, resulting in an annual percentage rate of 14.62 percent.
"The quarterly rate for the second quarter this year reflects a sharp decline of more than one percentage point from the previous quarter this year (2.2 percent) and is the lowest rate of appreciation since the fourth quarter of 1999 (1.12 percent) -- an era that spawned widespread home price deflation."
The year-over-year decline from the second quarter of this year to the second quarter of 2005 is the steepest decline since the 1975 inauguration of OFHEO's Housing Price Index (HPI).
"The annualized rate, now at only 4.68 percent, peaked at 17.87 percent during the third quarter of 2004."
There are a number of factors being blamed for the historically low appreciation rates. Some of the most notable factors are: unaffordable housing, better priced rentals, higher interest rates and the surging rise in housing supply.
These numbers represent a fundamental conclusion about the housing market that many investors have been reluctant to admit.
"'These data are a strong indication that the housing market is cooling in a very significant way. Indeed, the deceleration appears in almost every region of the country,' said OFHEO director James B. Lockhart."
While not all real estate markets are experiencing record low appreciation rates, the overall trend is obvious.
"Bend, OR, in one quarter moving up from No. 6, was the new home price appreciation leader among 275 metro areas with an annual rate of appreciation at 36.65 percent and a quarter-to-quarter rate at 7.37 percent. At the bottom of the heap, Ann Arbor, MI's home prices tanked, dropping 1.28 percent for the year with a full 1 percent loss in home values from the first to second quarter this year."
And most states that had high appreciation rates in this year's first quarter, had a large decline in year-over-year appreciation rates for the second quarter.
The second quarter of the year appears to be only the beginning as fewer houses are being sold, resulting in dropping prices. In the next year we may be comparing depreciation rates, rather than appreciation rates.