Economist's Commentary: May 13, 2008
Unusual Results
By Jed Smith, Managing Director, Quantitative Research
Today's release on housing price performance showed that one of three metropolitan statistical areas (MSAs) showed rising home prices in the first quarter, with only a small number of jumbo loan originations and higher foreclosures resulting in greatly mixed conditions around the country. In the first quarter of 2008, the median existing single-family home price was $196,300, down 7.7 percent from the first quarter of 2007 when the median price was $212,600.
As NAR Chief Economist Lawrence Yun indicated, "These are highly unusual results because there were very few jumbo loan originations in the latest quarter, so sales are much slower in high-cost areas, and at the same time foreclosures related to subprime mortgages rose." He continued, "Neighborhoods with little subprime exposure are holding on very well, while prices have fallen in neighborhoods with a wide prevalence of subprime loans because more foreclosed properties are being sold at discounted prices."
Homeowners with subprime loans account for less than 10 percent of all homeowners, but subprime mortgages account for more than half of all foreclosures. Sharp price declines have been primarily in neighborhoods where subprime lending has been widely prevalent. Real estate markets are local in nature, with some markets showing increased sales and prices at a time when other markets are decreasing. For example, a proportionately larger slowdown in home sales from a year ago in high-cost markets is continuing to drag down the aggregate national median price. Overall, housing inventories have stabilized, and mortgage availability is beginning to improve, leading to the expectation of price improvement during the second half of the year.
This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >
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