Washington, however, bucked the trend, recording a 1 percent increase in housing prices over the previous year. Analysts attributed the uptick — second only to that in Detroit — to the relative strength of the Washington-area economy.
The steepest decline was in Atlanta, with a 5.9 percent drop during September and nearly a 10 percent fall from the previous year.
“When you look at where we are, we’ve really made no progress. We’re back to where we were when the debt crisis happened,” said Mike Larson, real estate analyst at Weiss Research. “You can call it a malaise; you can call it a hangover; you can call it whatever you want. But the reality is, housing is still sort of the albatross.”
The latest data comes amid a flurry of numbers in recent weeks that paint a mixed picture about the state of the housing market.
On one hand, the number of building permits issued last month increased nearly 11 percent, and construction of new multi-family homes also picked up. Existing-home sales have seen a recent increase. Fewer homeowners have been falling behind on their mortgages. And consumer confidence saw a recent bump.
On the other hand, millions of foreclosures remain in the pipeline, clogging court systems and local real estate markets across the country. Persistent high unemployment has placed continued strain on homeowners struggling to make their payments, while stricter lending standards have prevented would-be home buyers from taking advantage of record-low interest rates.
“We’re not falling off a cliff anymore, but neither are we seeing the typical recovery,” Larson said. “That’s the environment we’re going to be in for a long time. We’re slowly working off the excess of a 15-year real estate binge in this country.”
Many analysts say that a long slog lies ahead and that home prices probably will not hit bottom until 2012 at the earliest. That viewpoint was bolstered by a recent report from the Center for Responsible Lending, a consumer advocacy group, which said that the foreclosure crisis has yet to reach its halfway point and that “there are no signs that the flood of home losses in America will recede anytime soon.”
Mark Vitner, a senior economist at Wells Fargo, said he expects the pace of home price declines to accelerate into 2012 before stabilizing, as long as the debt crisis in Europe or some other economic calamity doesn’t spark a global recession. He added that the nation’s political deadlock could prolong the housing markets woes even longer.
“We do not think we’re going to make meaningful progress clearing out the shadow inventory until after the presidential election,” said Vitner, adding that getting the foreclosure backlog cleared will require a government initiative unlikely to come in an election year. “There’s going to have to be some sort of program that rallies people to action, some sort of incentive that brings these foreclosures to the market.”
The federal government has taken a series of steps to help troubled borrowers and boost the mortgage markets, such as measures aimed at keeping interest rates low and assisting some homeowners who owe more than their properties are worth to refinance. Although those initiatives have helped certain homeowners, they have yet to provide a big enough boost to return the country’s housing market to health.
Washington’s real estate market, however, has shown more signs of life. That’s partly because Washington never experienced the massive bubbles that came back to haunt cities such as Las Vegas and Phoenix, and partly because of the federal government’s resilience in the face of recession.
“The economy in D.C. is stronger than in the rest of the country,” Vitner said. “Even though there’s a lot of pressure to cut the federal budget, and there have been restraints in federal spending, there haven’t been a lot of layoffs in government. That’s taken away a lot of the downside that exists in other housing markets.”