LPS: U.S. Home Prices Down Nearly 30% from Peak and Still Falling

November 15th, 2011
in econ_news

home-price-reduced-sign Econintersect:  JACKSONVILLE, Fla. — November 14, 2011 /PRNewswire/ — Lender Processing Services, Inc. (NYSE: LPS), a leading provider of mortgage and real estate technology, data and analytics, today announced that its LPS Applied Analytics division updated its home price index (LPS HPI) with residential sales concluded during August 2011. The LPS HPI summarizes national home prices by tracking monthly prices in over 13,500 ZIP codes. Within each ZIP code, it tracks five price levels from low to high.

Follow up:

“Unlike many other indices, the LPS HPI tracks home prices at the date of sale on a month-by-month basis,” explained Kyle Lundstedt, managing director for LPS Applied Analytics. “Our methodology allows us to detect market changes sooner than others and to provide the financial industry with the most accurately timed price information.

“In August sales transactions data, we saw the national average home price decline 0.9 percent, following a decline of 0.4 percent in July. This ended a series of increases during the spring of this year; a pattern that has occurred each year since 2009. In addition, the early, partial data for September sales indicates a likely further decline of approximately 1.1 percent to come. As of the end of August, the national average home price was $205,000. This is down 3.8 percent from August last year, and down 0.4 percent from January 1, 2011.”

Home prices in August continued the downward trend begun after the market peak in June 2006. The LPS HPI average national home price has declined 28.3 percent since then. The total value of U.S. housing inventory covered by the LPS HPI stood at $10.6 trillion at the peak. As of the end of August 2011, it was $7.65 trillion. During the period of most rapid price changes, from July 31, 2007, through December, 2009, prices declined $56,000 from $282,000. The average annual decline during that time was 13.8 percent (Figure 1).

Figure 1


Since December 2009, prices have fallen more slowly, interrupted by brief seasonal intervals of rising prices. Since then, the LPS HPI national average home price has fallen $20,000 from $225,000. This corresponds to an average annual decline of 3.6 percent (Figure 1). Price changes were largely consistent across the country during August. Prices increased in only five percent of ZIP codes in the LPS HPI (Figure 2). Higher-priced homes had smaller declines: -0.72 percent for the top 20 percent of homes (prices above $321,000) compared to -1.0 percent for the bottom 20 percent (below $103,000).

Figure 2


Price changes during August for any given state were largely consistent among the states’ metropolitan statistical areas (MSAs). Average prices of all MSAs in a state declined together for 347 of the 404 MSAs covered by the LPS HPI. A slightly smaller number of MSAs, 340, were in states where all price levels for all MSAs declined together. Average prices declined for all MSAs in Louisiana and Minnesota, but not all price levels declined for all their MSAs. Other states where some price levels in some MSAs increased were Illinois, Massachusetts, Michigan and New York.

Average prices declined during August in all but three of the 26 largest MSAs in the country that both the LPS HPI and Bureau of Labor Statistics’ economic data cover: Chicago, Detroit and Minneapolis remained essentially unchanged. Changes ranged from -0.3 percent in Honolulu to -2.8 percent in Atlanta (Table 1).

Table 1


Click on Table for larger image.

Since the beginning of the year, average home price declines have been in the minority for the largest 26 MSAs (Table 1). Ten of the MSAs have seen declines. The largest declines have been in Atlanta (-10.5 percent) and Phoenix (-5.2 percent). The largest increases have occurred in Detroit (10.8 percent) and Pittsburgh (4.5 percent).

Over the past year, however, average home prices have not declined in only six of the largest MSAs (Table 1). Prices have been largely stable in New York since August 31, 2010; they have increased in Detroit (5.3 percent), Honolulu (3.3 percent), Miami (0.6 percent) and Pittsburgh (3.2 percent).

Since the market peak, Pittsburgh is the only MSA that has seen its average home price rise (Table 1).

As of the end of August, four MSAs have average home prices below what they were at the end of January 2000 (Table 1): Atlanta (-20.4 percent), Cleveland (-7.4 percent), Detroit (-41.6 percent), and Phoenix (-8.0 percent).

Among the MSAs that the LPS HPI covers, those with the highest price changes during August were mostly in Michigan or nearby states. ‘Highest’ is a relative term, and among the highest price changes were modest declines. Sturgis and Grand Rapids, Mich., had the greatest monthly increase of all the MSAs at 0.4 percent.

Most of the MSAs with the greatest declines in price during August were in California or nearby Arizona and Nevada. There were several MSAs with large declines that are not in the Southwest. In addition to the 2.8 percent decline in Atlanta, Gainesville, Ga., had the greatest monthly decline among all MSAs covered by the LPS HPI, 3.0 percent.

For more information on this month’s LPS HPI Report, click here.

About the LPS HPI
The LPS HPI is one of the most complete and accurate home price sources available. For sales concluded during each month, the LPS HPI reports five price levels in each of more than 13,500 U.S. ZIP codes. The historical price paths of these levels can be easily used to find price paths of intermediate prices. The LPS HPI also supplies REO discount rates in each ZIP code, which are used in the HPI calculations to correct for the impact REO sales would have on estimates of open-market prices.

By combining property and loan data in its repeat sales analysis, the LPS HPI covers about 75 percent of properties in the U.S. The innovative approach used to maximize geographical resolution enables the HPI to meaningfully cover about 98 percent of these properties at the ZIP-code level. The LPS HPI’s five price levels and REO discounts for each ZIP code provide accuracies competitive with AVMs in out-of-sample tests.

About Lender Processing Services
Lender Processing Services, Inc. (LPS) is a leading provider of integrated technology, services, and mortgage performance data and analytics to the mortgage and real estate industries. LPS offers solutions that span the mortgage continuum, including lead generation, origination, servicing, workflow automation (Desktop®), portfolio retention and default, augmented by the company’s award-winning customer support and professional services. Approximately 50 percent of all U.S. mortgages by dollar volume are serviced using LPS’ loan servicing platform, MSP. LPS also offers proprietary mortgage and real estate data and analytics for the mortgage and capital markets industries. For more information about LPS, visit www.lpsvcs.com.

Source:  LPS Press Release via PRNewswire

Note:  PRNewswire is one of the continuous news feeds on each of the Econintersect Newspaper pages: Asia/PacificEuropeMiddle East/Africa, Americas and USA Government

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