Home prices fell even lower at the end of 2011, according to the most recent Standard & Poor's/Case-Shiller Home Prices Index.
The report indicated that home prices dropped 3.8 percent during the fourth quarter last year and settled at levels unseen since 2002. Both the HPI's 20- and 10-city indices fell 1.1 percent in December from the previous month. Meanwhile, on an annual basis, the larger index declined 3.9 percent, while the smaller fell 4 percent.
"In terms of prices, the housing market ended 2011 on a very disappointing note," said S&P index committee chairman David Blitzer. "With this month's report, we saw all three composites hit new record lows. While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended."
On a monthly basis, only two of the cities examined in the report showed price gains. This occurred in the Miami and Phoenix housing markets were prices rose 0.2 and 0.8 percent, respectively.
Meanwhile, even though homes continued to get more affordable at the end of 2011, the most recent Weekly Application Survey from the Mortgage Bankers Association found that application activity declined during the week ending February 24.
According to the survey, mortgage activity declined 0.3 percent from the previous week, while the seasonally adjusted Purchase Index rose 8.2 percent. A number of experts say the overall decline was a result of fewer current homeowners capitalizing on affordable mortgage rates to refinance their home loans.
"Mortgage rates remained near survey lows last week, but refinance volume fell slightly," said MBA vice president of research and economics Michael Fratantoni. "According to survey participants, more than 20 percent of refinance applications were for HARP loans. The HARP share of total refinance applications has increased over the past month."
The survey indicated that despite a greater share of borrowers taking advantage of the Home Affordable Refinance Program, the refinancing share of mortgage application activity fell to just 77.9 percent, from 80.1 percent the previous week.
However, the decline in mortgage application activity could be the result of a growing number of cash buyers capitalizing on affordable home prices across the country.
According to a recent report from National Public Radio, 34 percent of home sales in January were paid in cash. Industry analysts believe mortgage brokers and lenders are more inclined to deal with cash buyers, as it cuts out any issues that can arise during the home sale process.
Meanwhile, it's believed that most of the homes being pursued by cash buyers are distressed properties being sold at rock bottom prices. Many of these homes will not become buyer's primary residences, but will instead be used for investment purposes. Once bought, an investor can either fix up the property and sell is for a profit, or covert it into a rental unit.
No matter what investors decide to do with these, the trend is helping to cut down on the high vacancy rate that is currently plaguing many areas of the country. Further action from a number of government agencies could soon give way to bulk REO property auctions to more rapidly unload bank-owned properties.
