Home-price declines are improving

AUSTIN (KXAN) - There has been an improvement in home price declines.

Newly released data from the First American Core Logic and its Loan Performance Home Price Index shows that national housing prices fell 10.2 percent in April compared to a year ago. This represents the smallest year-over-year decline recorded in 2009. April’s decline was a 0.5 percent improvement over the 10.7 percent decline in March.

In the Austin and Round Rock areas home prices increased 1.91 percent in April and in March 2009, home prices showed an increase of 3.24 percent compared to a year prior.

Even though the rate of national price declines peaked at 11.9 percent in January 2009, the trend is going down. April’s rate is the lowest year to date and the May preview data implies further improvements. The rate of decline may go back to the single digits.

Since an adjustment for inflation has been made, the improvements in home price declines have been especially noticeable. The differences in home price changes between nominal and real, which is adjusted for inflation, are rapidly widening due to the deceleration of inflation in 2008 and the recent outright deflation as of May 2009.

In August of 2008 real home price declines peaked at -18.1 percent. In contrast, April 2009 data puts the real price decline at -8.4 percent. This is nearly a 10 percentage point improvement in real home prices since last summer, thanks to a slowing of the nominal price decline and deflation.

Since U.S. home prices peaked in July 2006, national home prices have declined 21.2 percent on a cumulative basis and are currently down to the lowest price level in more than five years.

“There is still a great deal of uncertainty with the housing market and the economy in general," said said Mark Fleming, chief economist for First American CoreLogic. But the rate of change in home price declines is beginning to show signs of not only a bottoming, but an improvement in both nominal and real terms, which is the more important indicator because real prices adjust for the distortions caused by inflation or deflation."

The shifts among the top five states have continued this month with Nevada (-26.1 percent) remaining the top-ranked state for annual price depreciation, but Florida (-23.2 percent) supplanted California and became the second-ranked state for price depreciation. After being the top-ranked state for 20 consecutive months – May 2007 and December 2008 – California's (-22.7 percent) home price declines have improved, putting California into third place in April 2009 ahead of fourth-ranked Arizona (-20.5 percent). The rapid deterioration of home prices in Illinois' (-17.4 percent) put that state in fifth place for the first time during the downturn.