Reporting from Washington —
Home prices ended the year on a high note in 2010, according to the latest government figures.
For only the second time since the sector's 2005 collapse, the average price of both new and previously owned houses sold registered a year-over-year gain. It wasn't much, at least not by pre-crash standards — just 3.5% — but it was more than respectable given the nation's economic doldrums.
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Of course, your local market may not have turned the corner just yet. But in another positive sign, the Federal Housing Finance Agency's survey of the country's 32 largest metropolitan statistical areas found that prices were up in 19 markets and practically unchanged in another.
The FHFA's survey is based on data from a sample of lenders, which report the terms and conditions on all single-family mortgages closed during the last five days of the month.
It does not include government-backed financing or refinanced mortgages, both of which tend to be somewhat lower than conventional mortgages. So the findings are skewed higher than they otherwise would be. Nevertheless, a housing market looking for any shred of good news will take heart in the latest numbers.
At the same time, the FHFA figures include distressed sales, which add a downward pull to the results. Stan Humphries, vice president of data and analytics at Zillow, the online real estate marketplace, said foreclosures can sell for 20% to 40% less than other properties, depending on the number of such properties on the market at any given time.
"We've done three different analyses, and even in markets with an extremely high volume of foreclosures, non-distress properties sell for more," Humphries said.
For that reason, he advises buyers and sellers to look at distressed and non-distressed properties separately and act accordingly.
"Foreclosures are an important part of the market, and a house needs to be priced competitively to stand out from the pack," he said. "But that doesn't mean you have to price your house like a foreclosure."
Distressed sales are different in several ways, Humphries said. For one thing, the seller, typically a bank but sometimes an owner who has the lender's permission to sell for less than what's owed, usually wants to offload the property quickly. For another, the house usually isn't in the best condition.
On the other hand, regular houses are generally in better shape. There also tends to be far less drama involved than with a foreclosure or short sale — fewer delays, no lost papers and no chain of approvals. But most of all, the economist pointed out, the seller's motivation is quite different.
Regular sellers often are willing to wait to achieve the price they think they deserve, even if it's not as much as the place could have fetched some years back. Consequently, if you are a patient seller or a buyer who doesn't want to hassle with someone else's problems, Humphries said, you should expect to sell and buy at a somewhat higher price than what is suggested by the FHFA's index.
(It should be noted that Zillow's monthly price index is the only one of the popular indexes that does not include foreclosures.)
With those caveats in mind, here's a closer look at the latest government numbers.
Of the 19 markets with higher prices, 11 registered double-digit gains. The largest jumps were recorded in Detroit (25.9%), Philadelphia (19.4%), Boston (19.1%) and San Antonio (18.6%). Also, gains of more than 16% were logged in Houston; Orlando, Fla., and San Diego.
Be cautious in reading too much into these increases. Although they include some measure of price appreciation, they also contain an element of market mix. In other words, to some degree, the gains probably were influenced by a larger number of transactions than usual in the higher-priced brackets.
As usual, the San Francisco Bay Area is the priciest in the land. The average paid for both new and previously owned homes in the Bay Area last year was $614,200. And that's only 0.3% higher than the average of $612,300 in 2009.
San Diego, on the other hand, registered a 16.5% jump in its average price, to $549,600 when 2010 came to a close from $471,600 at the end of 2009, making it the second-most-expensive place to buy a house.
New York moved up on the list to the third spot, displacing Los Angeles. In the Big Apple, the average increased 11.9%, to $488,600 from $436,500, while the average bumped up 4.9% in L.A., to $480,700 from $458,200.
The Washington-Baltimore, Md., market is now fifth on the top-10 list, even though prices there rose only 0.5%, to $451,200 from $449,000.
At the other end of the price spectrum, the five least-expensive markets all recorded declining prices. But as it is with price increases, part of the change is a result of an abnormal number of sales in the lower-price brackets.
How else to explain a 29.6% plunge in Kansas City, Mo., to $152,500 from $216,700? Or the 12.4% slide in Indianapolis to $197,800 from $225,900?
The declines drop Kansas City to the bottom of the list and Indianapolis to the third lowest. But those markets are generally considered to be relatively inexpensive anyway.
In between them now, though, is Las Vegas, which is emblematic of the housing-market crash. The average in the neon city in the Nevada desert is now down to $189,700. But as was noted earlier, that figure is highly influenced by the huge number of distressed sales.
Distributed by United Feature Syndicate.
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