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Grim outlook for US property market as prices still falling and foreclosures rising

Recent comments from some analysts that the market is recovering may be premature as the latest predictions now indicate that the bottom of the market has not been reached and prices are set to keep falling in 2010.

Property prices fell 0.4% from September to October and were down 0.9% from August, according to a market composite of housing prices compiled by Altos Research.

The composite of 10 major housing markets put home sales prices at $501,377 in October, down from $503,401 in September and $506,180 in August.

After dipping to $470,017 in January, the composite steadily increased through a July peak of $509,030, but has now declined every month since.

Altos Research projects prices will continue to decline until the end of 2009 due to seasonal trends.

Prices fell in 23 of the 26 markets surveyed during October. The greatest decline was in Salt Lake City where prices fell 3.3% in October.

Phoenix saw a 2.1% decline, Los Angeles was down 2% and Las Vegas was down 1.2% although the pace of the decline has slowed.

But although the overall trend is still downward some areas are seeing price increases such as San Francisco and San Jose where they increased 1.1%. Miami saw prices remaining static.

There are also signs that the foreclosure crisis is not weakening.

The rate of non-current loans, a combination of foreclosures and delinquencies as a percent of active loans, reached 12.49%, a record high in the US, according to a report from Lender Processing Services (LPS).

The LPS Mortgage Monitor report showed that the nation’s September foreclosure rate jumping to 3.12%, a 2.6% increase from the previous month and an 88.9% hike from last year.

Florida led the way with 10.4% of loans in foreclosure, and more than 22% of loans reported as non-current.

The total US delinquency rate now stands at 9.37%, according to the report, and the number of loans sinking further into delinquent status more than doubled the amount of foreclosure starts.

The six-month deterioration ratio rose in the past two months to 300%, meaning that for every loan that improves in status, three more deteriorate further, according to the report.

This large ‘shadow’ inventory of foreclosures and real estate-owned (REO) inventory indicates another onslaught of troubled loans in an already backed-up pipeline, according to the report.

Meanwhile a report from Deutsche Bank predicts that the US property market will lose almost a third, some 32%, of its aggregate value from peak to trough.

Price depreciation so far has wiped out about $5.7 trillion in housing wealth, reducing the US housing market aggregate value to $18.3 trillion, Deutsche said.
And, the market hasn’t hit bottom, yet, the bank says, with its report predicting that the declines in house prices, aggravated by sweeping foreclosures and the significant shadow inventory are set to depress prices even further in 2010.