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Housing prices sink at record pace

Wednesday, April 30, 2008

NEW YORK -- In a bad omen for sellers and lenders this spring home selling season, the erosion of house values is accelerating and foreclosure filings are doubling, new data showed Tuesday.

A closely watched index of home prices in 20 cities fell almost 13 percent in February from a year earlier, a record for the seven-year-old S&P's/Case-Shiller Home Price index. The report follows news that foreclosure filings between January and March also hit a new high, and comes a day after the government said the number of vacant homes on the market also hit a record.

"Month to month, it gets consistently worse," said David Blitzer, chairman of the index committee at S&P, noting that February also marked the sixth straight month that all 20 cities experienced declines. "The slope is one direction. There is no sign of a bottom."

He said 17 of the metro areas the index tracks reported record annual declines, led again by Miami and Las Vegas.

Charlotte, N.C., was the only city to post an annual gain of 1.5 percent, but Blitzer noted that Charlotte's positive returns continue to diminish with each month and it was the last city in the index to reach its peak.

The lopsided market, of course, means home buyers with good credit have an abundance of options.

Jody Hanson and her boyfriend Scott Harrison want to buy a two-story house with at least three bedrooms in Las Vegas for no more than $225,000. So far they have been out-bid on four foreclosed homes.

"There are just a ton of people here getting foreclosed upon," Hanson said, "so there are just so many deals waiting for you."

Half of all sales in Las Vegas are foreclosures, said Karen Wilson, a local Century 21 agent, though she said the glut of homes on the market has started to wane and transactions have picked up.

Nevada posted the country's worst foreclosure rate in the first quarter, RealtyTrac Inc. said Tuesday, with one in every 54 households receiving a foreclosure-related notice.

Nationwide, one in every 194 households received a foreclosure filing during the quarter, more than double the same period last year.

The most recent quarter marked the seventh consecutive quarter of rising foreclosure activity.

"What would normally alleviate the foreclosure situation in a normal market is people starting to buy properties again," said Rick Sharga, RealtyTrac's vice president of marketing.

However, people without perfect credit and a significant down payment are having trouble getting loans, and that is slowing the market's recovery, he said.

Falling home prices are driving up the number of loan defaults and foreclosures, deepening the toll lenders are paying for their reckless lending practices during the housing boom.

On Tuesday, Countrywide Financial Corp. said it lost $893 million in the first quarter after setting aside $1.5 billion to cover losses on unpaid home loans. The staggering lender agreed in January to sell itself to Bank of America Corp. for about $4 billion in stock.

The housing crisis, coupled with soaring food and fuel prices, are making consumers more pessimistic. A widely watched gauge of consumer sentiment hit a five-year low, a private research group said Tuesday, which doesn't bode well for a housing turnaround.

"Once the market starts in a given direction, the momentum will carry it down, even below the [historic] trend line, until something happens to change the overall psychology," said Jim Gaines, a research economist at Real Estate Center at Texas A&M University.


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