Foreclosures spur fall in US prices

By Kathleen M. Howley  |   2008-11-20  |     NEWSPAPER EDITION

HOME prices fell in four out of every five United States cities in the third quarter, a record spurred by distressed foreclosure sales across the country.

The median price of a US home declined 9 percent from a year earlier and sales of properties with mortgages in default accounted for at least a third of all transactions, the latest figures show from the National Association of Realtors.

Prices fell in 120 metropolitan areas, rose in 28 and were unchanged in four, the biggest share of declines in data going back to 1979, Bloomberg News reported.

The financial turmoil sparked by the collapse of the US subprime mortgage market has caused US$666 billion of losses for US banks, lenders and insurers. American companies slashed 1.4 million jobs in the last six months, the biggest cut since 1975.

"Housing is front and center of the financial crisis," said Mark Zandi, chief economist at Moody's Economy.com. "So long as house prices are declining and foreclosures mounting, the financial system will struggle and the economy will be in recession."

The steepest price declines were all in California. The area surrounding San Bernardino had a 39-percent fall in its median home price to US$227,200. Sacramento saw a 37-percent decline to US$212,000, and San Diego had a 36-percent drop to US$377,300. The US median is US$200,500.

Elmira, New York, had the biggest price increase, with a 13-percent gain to US$105,000, according to the report. Decatur, Illinois, rose 8.7 percent to US$93,400, and the median price in Bloomington, Illinois, grew 8.1 percent to US$168,400.

Foreclosures boosted sales of single-family houses and condominiums to 5.04 million in the third quarter at a seasonally adjusted annual rate, up 2.6 percent from the second quarter, the report said.