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US home prices decline in third quarter

Builders work on a new house under construction in Loudonville, New York, on Thursday. A report from the Commerce Department showed that new-home sales increased 1.7 percent in October from September. PHOTO: AP

US home prices marked a quarterly decline for the first time in 13 years in the third quarter, according to government data released on Thursday that provide fresh evidence of the housing market slump.

Home prices dipped 0.4 percent nationwide in the July-September period, compared with the previous quarter, the Office of Federal Housing Enterprise Oversight (OFHEO) said.

Compared with the third quarter of last year, US home prices posted an increase of 1.8 percent, but it was the smallest year-on-year increase since 1995, according to the agency, which oversees the big mortgage-finance companies Fannie Mae and Freddie Mac.

"While select markets still maintain robust rates of appreciation, our newest data show price weakening in a very significant portion of the country," agency director James Lockhart said in a statement.

Prices declined in 21 states, OFHEO said.

The first quarterly decline since 1994 in the agency's House Price Index, based on data from home sales and refinancings, did not surprise David Resler, chief economist at Nomura Securities in New York.

"Our assumption is that a declining trend will now set in" that will mirror declines in other indices of home prices, he said. "We're getting into an environment where you can almost have a paralytic kind of situation. The question is whether sellers are lowering their asking price enough to move the property."

Also on Thursday, the Commerce Department said the median sales price of a new home fell 13 percent in October compared with a year ago to US$217,800. It was the biggest annual decline since September 1970 in the median price, the point at which half of homes sell for more and half for less.

A mortgage research firm, meanwhile, said US foreclosure filings nearly doubled next month from the same month last year. A total of 224,451 foreclosure filings were reported in October, Irvine, California-based RealtyTrac Inc said on Thursday.

According to OFHEO's data, many of the cities and states experiencing the sharpest declines in the quarter were the same areas that had posted the largest increases a couple of years ago during the housing boom.

Price declines were steepest in California (down 3.6 percent), Massachusetts (2.3 percent), Michigan (3.7 percent), Nevada (2.4 percent) and Rhode Island (2.2 percent).

"Rising inventories of for-sale properties are clearly having a material impact on home prices," said Patrick Lawler, the agency's chief economist.

Other measurements of home prices have been falling for some time while OFHEO's index, until now, had continued to rise. The reason, economists say, lies in differences in how home prices are calculated.

The widely tracked Standard & Poor's/Case-Shiller nationwide housing index, which fell 4.5 percent in the third quarter from last year, focuses on major metropolitan areas and includes expensive properties as well as cheaper ones.

The federal government index, while more national in its scope, excludes higher-priced homes and ones financed by riskier mortgages.
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