National home prices declined in January from December by 0.9%, reaching a level not seen since March 2003, according to Lender Processing Services (LPS).
The average value for a home fell $1,000 to $195,000 through January, the Jacksonville, Fla.-based analytic firm said. Meanwhile, LPS is projecting a slim price drop of 0.3% to take place in February.
Higher-priced homes, the top 20%, fell in value the least during January by 0.8%, while the value of the lowest-priced homes decreased the most by 1.7%. The mid-priced homes also dropped in value by 1.3%.
Price changes were largely consistent in January from the prior month as only 9% of the zip codes LPS covers in its home price index report experienced an increase in property values.
Of the 585 metropolitan statistical areas examined by LPS, 524 saw home prices fall.
Out of the 26 largest MSAs, only San Francisco, Cleveland and Chicago saw price declines of more than 1.5%, while 14 cities experienced month-over-month declines of at least 1%. Washington DC was the lone market to experience home price increases from December to January.
The January LPS HPI report is the first to account for the impact short sales and REO sales have when estimating the value for a non-distressed property. The HPI now reports monthly discounts from market prices for these distressed sales, allowing greater accuracy for loan loss estimates.
In June 2007 when prices averaged $262,000, foreclosure sales and short sales discounts accounted for 20% and 10% of the declines, respectively. Currently, foreclosure sale discounts represent 29% of the average home price and short sale discounts are 23% of the value.
“With proper accounting for short sales, we see two things. First, prices on normal (non-distressed) properties are doing a bit better than had been estimated before. The dramatic fall in prices after the bubble is actually closer to 26%, less than the 30% which we and others have previously reported,” said Raj Dosaj, vice president of LPS Applied Analytics.
“This is due to the fact that many of the short sales appear to be the same homes that saw significant increases in values during the bubble.
“The second piece of information gleaned is that banks are getting about the same price on both short sales and foreclosure sales in areas that have high levels of distressed transactions,” Dosaj continued.
“Clearly the mortgage industry has made significant efforts to put distressed properties through the short sale process as an alternative to foreclosure.”