Home Prices Showing Signs Of Stabilization

Home prices continued to decline last year as the median price of U.S. single-family home was $173,200

Prices actually gained ground in the first nine months of 2009. But between October and December 2009 prices fell 2.9% according to the National Association of Realtors.

Still this is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices. Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable.

Another sign of improvement is the increase in the number of homes sold. More than 6 million homes changed hands between October and December of 2009 -- a 27.2% increase from the same time period in 2008.

The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates. With inventory levels trending down over the past 18 months, we can expect broadly balanced housing market conditions in much of the country by late spring with even some areas showing higher prices.

Sales volume increased in all but two states; 32 states recorded double-digit homes sales gains. Foreclosures sales unfortunately continued to drive these increases; distressed properties, which includes foreclosures and short sales, accounted for 32% of sales during the quarter.