Home Prices Tumble in Most Distressed Property Categories in June

Tue, Jul 27, 2010


By: Carrie Bay

A drop in homebuyer activity following the contract deadline for the federal tax credit incentive helped trigger a noticeable decline in home prices between May and June, according to an industry study released Monday by the research firm Campbell Surveys.

The company’s latest market analysis found that home prices fell in three out of four property categories last month. Average prices tumbled by 6.8 percent for move-in ready foreclosed properties, 6.3 percent for short sales, and 4.6 percent for non-distressed properties. In contrast, prices for damaged foreclosed properties increased by 5.9 percent on average in June.

“These price declines are related to decreased homebuyer demand surrounding the end of the tax credit,” noted Thomas Popik, research director for Campbell Surveys. “Some housing market analysts had expected demand to remain strong through the end of June, but in retrospect it’s clear that the peak of first-time homebuyer activity occurred three months earlier, in March.”

The first-time buyer share of home purchase transactions was 42 percent in June, according to the survey – well below the 48 percent level reported in March. This reflected the fact that first-time homebuyers were given a federal tax break of up to $8,000 for buying a primary residence, provided they were under contract by April 30.

One Florida-based real estate agent responding to the survey commented, “Prices are dropping…same house that had 2 showings a day in April with hopes of a closing by June at $139,000 now gets a showing of just one a week if we are lucky and at $129,000.”

Another agent located in Ohio said, “Buyers just plan on deducting the $8,000 off what they are going to offer now. So, now prices are dropping to compensate for the credit not being available.”

The survey results suggest that home prices are likely to continue their decline in the months of July and August.

Real estate agents were asked in the June survey, “With the end of the homebuyer tax credit, do you notice prices for contracts signed in June going up, down, or staying flat?” Agents responding “down” outnumbered those responding “up” by a ratio of 10 to 1.

“Contracts signed in June will be closing in July and August,” Popik explained. “That’s why we know prices for closed transactions will continue their decline. But this won’t be reflected in the publicly-released price indexes until October or November.”

Campbell’s monthly real estate survey is conducted in conjunction with Inside Mortgage Finance and queries more than 3,000 real estate agents nationwide to provide a snapshot of home sales and mortgage usage patterns.

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