Home price outlook shows more declines ahead
April 28, 2011
by Steve Brown/The Dallas Morning News

When it comes to home prices, it’s easy to be jaded about the constant stream of local and national data.

Seems as if every week there’s another report, and the numbers rarely line up.

But for the last eight months or so, all of the arrows on the charts have been pointing in the same direction — down.

Home prices in North Texas are off about 10 percent from their peak. And prices are down by more than a third nationwide from just a few years ago.

And the worst probably isn’t over, according to top housing economist Mark Fleming of CoreLogic Inc.

Prices around the country could drop 15 percent to 20 percent more in the worst case, Fleming said Thursday at a Dallas meeting of the National Multi Housing Council.

“I don’t actually expect house prices to decline that much, but the pressure is there,” Fleming said. “There is lots of inventory there.

“We will probably lose another 4 or 5 percent in 2011.”

Home prices in North Texas have fallen about 5 percent since last summer. And a flood of foreclosed homes hitting the market is dragging average values down.

Fleming said more than a third of the houses being sold nationwide are distressed properties.

“Those homes are selling at significant discounts, which will further draw down prices,” he said. “The healthy market is not declining.

“All the declines in house prices are really being driven by those distressed sales,” Fleming said.

More than 20,000 homes were foreclosed on in the Dallas-Fort Worth area last year — a record high. Many of those properties are now showing “for sale” signs just in time for the spring market.

Recent studies suggest that the average markdown of a foreclosed home in Texas is about 30 percent. So even if just a third of the market is sold on that basis, it can be a wallop for overall prices.

And the prospect for more foreclosures seems to be unending.

Fleming’s California real estate research firm estimates that almost 11 million U.S. homeowners with loans owe more than their homes are worth.

“There is $750 billion in negative equity out there,” he said. “Negative equity is something that’s going to last in many markets for seven to 10 years.”

In the Dallas area, 12 percent of homeowners with loans — or more than 90,000 borrowers — are underwater, CoreLogic estimates.

Most of those owners won’t walk away from their loans, Fleming said.

“You will live there and stay there and hope that things get better,” he said. “But the volume of sales activity is significantly lower if negative equity exists in those markets.”

That’s one of the reasons Fleming predicts it will be a stretch before the housing market is back to normal and why many potential buyers still expect prices to fall.

“It’s probably going to take 10-plus years to recover,” he said. “There are deflationary expectations taking hold in the housing market.”

Courtesy The Dallas Morning News
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