WASHINGTON – Home prices fell in a record four out of five U.S. cities in the third quarter as low-cost foreclosures flooded the market and the U.S. housing market's decline spread throughout the country.
Among 152 metropolitan areas included in the trade group's survey, 120 posted declines in median home sales prices compared with a year ago, the National Association of Realtors said Tuesday. Nationally, sales fell by almost 8 percent in the third quarter compared with the same period a year ago.
Sales of foreclosures and other distressed properties made up around 40 percent of transactions in the quarter, bringing down the median price by 9 percent from a year ago to $200,500.
"A very large proportion of distressed home sales are taking place at discounted prices compared to more normal conditions a year ago," Charles McMillan, the Realtors group's president, said in a statement.
That's especially true in places like Sacramento and Riverside, Calif., where prices were down 37 percent and 39 percent, respectively, from last year. The two California cities had the largest annual price declines in the report.
A nasty brew of strict lending standards, falling home values and a tough economy is filtering through the housing market. By the end of the year, foreclosure listing service RealtyTrac Inc. expects more than a million bank-owned properties to have piled up on the market, representing around a third of all properties for sale in the U.S.
Meanwhile many economists believe the economy has fallen into a recession that could be the worst downturn in more than two decades. As layoffs accelerate, that's likely to put further downward pressure on housing prices.
Freddie Mac said last week that rising unemployment rates, tightening credit and deteriorating economic conditions "contributed to a substantial increase in the number of delinquent loans," including loans made to borrowers with strong credit.
Freddie Mac has 28,000 foreclosed properties on its books, while its sister company, Fannie Mae owns 67,500.
On Tuesday, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said "it is essential" to use some of the funds in the government's $700 billion financial rescue program to stem the tide of foreclosures.