Washington Home Prices Fall Again in March

18 Percent Decline From 2008 Is Not as Steep as Drops in Other Metro Areas

Home prices in the Washington region fell 18.4 percent in March compared with the same period a year ago, according to the Standard & Poor's/Case-Shiller Home Price Index released yesterday, which found that the housing market remains weak across the country.

The price declines in the Washington region are not as severe as in other parts of the country, but help reinforce fears that home prices will not begin to stabilize this year, despite glimmers of improvement in some of the nation's hardest hit areas.

Nationally, prices fell 19.1 percent during the first quarter compared with the same period in 2008, according to the report. That was the largest decline in the 21-year history of the index, which tracks single-family home prices. Nationally, prices fell to 2002 levels during the first quarter and 32.2 percent from their peak in the second quarter of 2006, according to the S&P/Case-Shiller report.

The index found similar housing woes in the nation's largest metropolitan areas. Of the 20 cities tracked, nine showed record-setting price declines in March. Prices fell more than 30 percent in Phoenix, Las Vegas and San Francisco in March, making them the worst-performing cities compared with the same period a year ago.

The 18 percent decline in the Washington region was not as steep, but worse than places such as Dallas and Denver, where prices fell about 5 percent.

Prices likely will continue to fall across the country into 2010 as buyers make their way through the backlog of homes on the market, analysts said.

Foreclosures are also weighing on the market and are likely to become a bigger problem. The Mortgage Bankers Association delinquency survey, scheduled to be released tomorrow, will likely show an increase in the percentage of borrowers falling behind in their payments as they lose jobs, analysts said. Also, after various foreclosure moratoriums late last year, many lenders have restarted the process, signaling a potential uptick soon, analysts said.

A significant increase in foreclosures would dump more properties on the market and drive down prices even further. About $119 billion worth of mortgages are already at least 30 days late, said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. Chandler has estimated that at least 2 million homes will end up in foreclosure this year, compared with 3 million in 2007 and 2008.

"The combination of foreclosures and rising unemployment puts downward pressure on home prices," Chandler said.

Another challenge to the housing market is that government and industry efforts to decrease foreclosures, including modifying the loans of troubled borrowers, has yet to have a significant impact. Fitch Ratings projected yesterday that 65 to 75 percent of modified loans would default again after 12 months.

Lenders are ramping up foreclosure prevention efforts, but "more often than not, reducing home payments to an affordable level may not be enough to rescue borrowers who are overextended on other credit and expenses," said Diane Pendley, a managing director at Fitch. "With continued home value declines in many markets, there is growing evidence that some homeowners are voluntarily walking away from their homes even if they can financially afford to stay."