Expect home-price slump to continue

National home prices were up slightly in February from a year ago -- the first annual increase in more than three years -- but are expected to give up those gains and more later this year, according to a report from First American CoreLogic.

First American CoreLogic's LoanPerformance Home Price Index showed prices up 0.3 percent in February from a year ago, compared to a 0.5 percent year-over-year price decline in January.

The index currently shows a 30.6 percent decline in national home prices from an April 2006 peak, or 21.7 percent if distressed properties are excluded.

But home prices remain vulnerable to pressure from rising interest rates, "shadow inventory" and the pending expiration of the federal homebuyer tax credit, the report said.

The report predicts a softer recovery than previously projected, forecasting that expected gains in national home prices during the spring and summer will be wiped out in the second half of the year.

First American CoreLogic expects continued year-over-year price declines in 29 of 45 markets tracked in the reports, up from 14 in last month's forecast.

Markets facing the biggest declines through February 2011 are Detroit (-16.4 percent), Seattle (-5.8 percent), Atlanta (-4.5 percent), Cleveland (-4.1 percent) and Indianapolis (-3.8 percent), the report said.

Markets that are expected to see price appreciation include Denver (5.2 percent), Las Vegas (5 percent), Riverside, CA (3 percent), and Houston (3 percent).

The LoanPerformance Home Price Index is projected to fall 3.4 percent during the year ending February 2011, based on expectations that inventories will grow as interest rates rise and the homebuyer tax credit expires.

The tax credit, along with foreclosure prevention programs and $1.25 trillion in purchases of mortgage-backed securities (MBS) by the Federal Reserve, have contributed to home price stabilization, the report said. ...CONTINUED

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