Major Metro Home Prices Down as Foreclosure Inventory Increases

By Kyle Chezum Updated on 3/29/2011

Several things have happened that will have a profound effect on the state of the housing sector.  First, in preparation for Wednesday's meeting of attorneys general with bank representatives to negotiate a settlement for the foreclosure crisis, the US Treasury has stated that it plans to publicly grade all major banks based on the number and effectiveness of loan modifications they have provided and continue to provided to borrowers.  Timothy Massad, acting assistant secretary at the US Treasury Department, claims this step toward transparency is one of the best ways to help both banks and homeowners get along.

The government has placed a major emphasis on loan modifications in light of the continued effects of the foreclosure crisis.  This leads to the second major event. that will affect the marketplace.  Today, Lender Processing Services, a mortgage and real estate data firm, released a report that showed overall foreclosure inventory is building up much faster than it can be sold off in the market.  Though overall mortgage delinquencies have declined, this "good news" has mainly come only as a result of the rising tide of foreclosures.  Foreclosure inventory level are now about 30 times higher than the sales volume of foreclosures each month can clean up.  This has put a continuously tightening downward pressure on home prices and sales numbers.

This is the third piece of news.  The Standard & Poor's S&P/Case-Shiller Home Price report for the month of January showed significant home price declines in all major metropolitan areas but two.  Overall home prices decreased 3.1% during the year.  David Blitzer, chairman of the S&P Index Committee, summed up the situation in a compact, if gloomy, way.  “These data confirm what we have seen with recent housing starts and sales reports. The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery."

This is the state of the housing and mortgage marketplace.  Will the situation change?  Of course.  But it hasn't yet.  In many places, and for many buyers, it will be more of the same for some time to come.