Home Price Perspectives Warped by Tax Credit: CoreLogic

Yet another study has been released which indicates home prices are trending lower.  CoreLogic's March Home Price Index (HPI) pegs that decline at 7.5 percent in March compared to the HPI in March 2010.  March was the 8th straight month when the HPI was lower than it was during the same period a year earlier. 

“Last year the First Time Homebuyer Tax Credit pulled a significant number of sales forward and, to an extent, artificially supported prices. So, absent the tax credit, it is understandable that we see prices continue to decline when compared with last year,” said Mark Fleming, chief economist with CoreLogic. “As we move further away from that support, we will see a leveling of prices and eventually organic improvements in the market.”

The CoreLogic HPI is a repeat-sales index that tracks increases and decreases in sales prices for the same set of homes over-time.  The data includes distressed sales, both short sales and sales of bank-owned real estate. The decline in home prices is not nearly so dramatic, however, when those distressed sales are eliminated from the mix.  Excluding those sales, the HPI for March is down 0.96 percent year-over-year.  The total HPI figure in February had declined 5.8 percent from the previous year but, again, when distressed sales were removed the change was only -2.0 percent.

The same is true across the states.  Without short and REO sales included in the data, 19 states experienced actual increases in March.  The five states with the highest appreciation based on the total HPI were West Virginia (+7.7 percent), North Dakota (+4.1 percent), New York (+3.5 percent), Alaska (+2.4 percent) and Maine (+0.4 percent.)  When distressed sales are excluded the highest appreciation occurred in West Virginia (+11.5 percent), New York (+4.5 percent), Mississippi (+4.4 percent), North Dakota (+4.1 percent) and Alaska (+4.0 percent.)

On the other end of the scale, those states with the greatest depreciation including distressed sales were Idaho (-13.3 percent), Arizona (-12.3 percent), Michigan (11.9 percent), Florida (-0.6 percent) and Illinois (-10.6 percent).  When distressed sales are eliminated there is a pronounced shift; Nevada (-8.9 percent), Idaho (-8.8 percent), Arizona (-6.6 percent), Maine (-6.6 percent) and Minnesota (-5 percent).  One must assume there was an anomaly in Maine probably related to sample size that allowed it to rank among the highest states in both appreciation and depreciation.

The national HPI has depreciated 34.8 percent since the peak in April 2006.  When distressed sales are excluded from the data the drop is 22.5 percent.

Among the top 100 Core Based Statistical Areas (out of 592 covering 86 percent of the U.S. population) 92 declined between March 2010 and March 2011.  A year-over-year drop was recorded by only 85 of the areas in February.