CoreLogic shows home price declines driven by distressed properties, a hint of stabilization for non-distressed sales

Just a quick post to update my ongoing posts about home prices.

They’re still falling, at least as of February, pretty dramatically. CoreLogic Home Price Index data essentially mirrors Case-Shiller:

According to the CoreLogic HPI, national home prices, including distressed sales, declined by 6.7 percent in February 2011 compared to February 2010 after declining by 5.5 percent in January 2011 compared to January 2010. Excluding distressed sales, year-over-year prices declined by 0.1 percent in February 2011 compared to February 2010 and by 1.4 percent in January 2011 compared to January 2010. Distressed sales include short sales and real estate owned (REO) transactions.

It will be interesting to see if that pattern holds in coming months for non-distressed sales. Maybe we’re close to a point in some communities with few foreclosures where home prices might be stabilizing after the declines in recent months. I suspect that’s only possible in areas where inventories are reasonably low, but we’ll see.

The next few graphs are from Calculated Risk, a website I recommend to everyone.

Note that the index above was synced to 100 in 2000. Laying a ruler along the general trend line, it’s arguable that prices are where they should be historically. The danger, however, of over-shooting to the downside remains extreme because of a variety of factors: high levels of inventory, distressed sales, underwater mortgages, a slow recovery, a huge number of buyers already having been siphoned out of the pool by the expired tax credits, and general concerns about household wealth.

The next graph shows inflation-adjusted home prices. It also indicates that we are close to a logical historical number — and maybe that prices are even a little low:

With apartment vacancy rates falling pretty sharply, we’ll likely see some stabilization of the price-to-rent ratio, which should boost home prices. The increasing number of occupied rental units also suggests greater household formation (although some of those renter are former owners of homes), which is certainly a good sign over the next couple of years for home sales. Still, the high levels of inventory (Chatham County has about twice the national average in terms of months of supply) are going to exert downward pressure on prices, even as other forces encourage stabilization.