Home Prices on an Increasing Trend But Face Downward Pressure

U.S. home prices were on an increasing trend in 155 out of 384 metro areas during the last quarter of 2009. These areas include markets in California, Ohio and Michigan.

However, the average home prices were down 2.5% from the same quarter in 2008. This is probably due to the high levels of unemployment, a rising interest rate environment, and the many number of foreclosure properties found in markets such as Arizona, Florida and Nevada.

According to David Stiff, chief economist of Fiserv, this trend of increasing home prices is set to continue. Stiff said, “Optimism that a sustainable economic recovery is underway is driving increases in home prices across many U.S. metro areas. More and more, consumers have confidence that buying a home doesn’t mean catching a falling knife,” said David Stiff, chief economist, Fiserv. “Very large price declines have also made housing much more affordable, drawing in both first-time homebuyers and investors.”

Home prices in Washington, D.C. were up 5.2% year-over-year. Compared to when the property market hit bottom during the early part of 2009, home prices in this area have gone up by more than 9%.

Elsewhere in Ohio and Michigan, prices are already seeing signs of stabilization, and housing has become much more affordable.

And in other geographical markets where foreclosure property sales have been the majority of the transactions, things are also slowly returning back to a more balanced state. Detroit, Minneapolis and Memphis are just some examples of this.

Despite this, Stiff believes home prices will still face continued downward pressure. “The first-time homebuyer tax credit has expired, the Federal Reserve has stopped buying residential mortgage backed securities (MBS) and the projected number of foreclosures remains extremely high. As a result, markets with recent price increases may see small price declines before prices finally stabilize at the end of this year or early 2011,” added Stiff.

The median U.S. home price was $170,300 at the last quarter of 2009, whilst the median monthly mortgage payment fell to 14 percent of median family income, a decrease of 1 percent over the third quarter.