U.S. Home Prices Fell 2.8% in October From Prior Year, FHFA Says

By Prashant Gopal

Dec. 22 (Bloomberg) -- U.S. home prices fell 2.8 percent in October from a year earlier, the Federal Housing Finance Agency said, as foreclosures continued to depress real estate values.

The slump was led by the regions that include Nevada and Arizona, and California and Washington, which both had a 5.5 percent decrease, the agency said today in a report from Washington. The region that includes Illinois and Ohio had the second-largest decline of 3.9 percent.

The U.S. housing market must absorb more than 14 million distressed properties before the foreclosure crisis eases, according to RealtyTrac Inc. The total includes 1.5 million homes in the foreclosure process, 3.5 million with delinquent mortgages and at least 10 million in which the borrower is “underwater,” or owes more than the house is worth, data from the Irvine, California-based researcher show. Distressed properties sell at a discount and undermine real estate values.

Home prices in October dropped 0.2 percent from the previous month on a seasonally adjusted basis, according to the FHFA. That was worse than economists’ projection of an increase of 0.2 percent, the average of 16 estimates in a Bloomberg survey.

The FHFA’s U.S. House Price Index is 19.2 percent below its April 2007 peak and about the same as the February 2004 level, according to the report.

Housing Affordability

Falling prices and low borrowing costs are making real estate more affordable and may be bolstering demand. Mortgage rates for 30-year fixed loans dropped to 3.91 percent in the week ended today, the lowest in records dating to 1971, McLean, Virginia-based Freddie Mac said.

In November, sales of existing homes climbed 4 percent from the previous month, to a 4.42 million annual pace, the most since January, the National Association of Realtors said yesterday.

The FHFA report measures changes in real estate values using purchases of properties with mortgages backed by Fannie Mae or Freddie Mac. It doesn’t provide a specific price for homes.

As measured by the National Association of Realtors, the median home price was $160,800 in October. In November, it climbed to $164,200, the trade group said yesterday.

--With assistance from John Gittelsohn in Los Angeles and Kathleen M. Howley in Boston. Editors: Christine Maurus, Larry Edelman

To contact the reporter on this story: Prashant Gopal in New York at pgopal2@bloomberg.net

To contact the editor responsible for this story: Daniel Taub at dtaub@bloomberg.net