The median price of homes sold in the U.S. in the first three months of this year was 4.6% lower than in the first quarter of 2010, according to the National Association of Realtors' quarterly survey.
Prices have declined in 118 of the 152 metropolitan areas included in NAR report. Overall, prices declined in all four U.S. regions.
The Midwest saw the biggest decline in prices. In the first quarter, homes in the Midwest sold for a median price of $124,400, a 5.3% drop compared to the same period last year. The Northeast experienced a decline of 5%, with a median price of $234,100. The West saw a decline of 4.7%, with homes selling for about $197,400. The South fared somewhat better than the other regions, with prices falling about 0.6%.
But the good news is the lower prices have contributed to an increase in the volume of homes being sold. Total home sales, including single family homes and condos, increased by 8.3% to a seasonally adjusted annual rate of 5.14 million in the first three months, compared to the previous quarter.
"The rising sales trend in nearly all states is a part of the healing process to clear off inventory. Sales need to rise before prices can firm up," says Lawrence Yun, NAR's chief economist.
Some fortunate areas actually saw prices increase.
The median home price rose in 34 metropolitan areas, including in Charlotte-Gastonia-Concord, N.C.-S.C., where the median home sales price increased by 12.2% compared to last year. That metro area was followed by Buffalo-Niagara Falls, N.Y.
Peter Cimino of Buffalo Niagara Association of Realtors says home prices didn't go through the roof during the housing boom, which has helped the area maintain home values.
"They increased as needed but it wasn't like in most places," he says. "The best investment in (western) New York is still your home. We continue to see growth," and several new housing subdivisions are under construction in the area, he says.
Sales of distressed homes, or homes sold at deep discounts, accounted for about 39% of homes sold in the first quarter.
"The biggest sales increase has been in the lower price ranges, which are popular with investors and cash buyers," Yun says. "The preponderance of sales activity at the lower end is bringing down the median price, so what we're seeing is the result of a change in the composition of home sales."
The volume of homes sold for $100,000 or less in the first quarter was 8.9% higher than during the period last year, which helped pushed down the national median sales price. All-cash deals accounted for 33% of home sales in the first quarter, up from 27% in the first quarter of 2010. Two-thirds of homes sold in the first quarter of this year were bought with the help of mortgages.
NAR President Ron Phipps says strong sales of distressed homes are needed in the current market. "The good news is foreclosures, which account for two-thirds of all distressed homes sold, are selling very quickly," he says.
About 21% of homes sold in the first three months were bought by investors, NAR says.
First-time homebuyers have somewhat pulled back from the market after the expiration of the home buying tax credit last year. First-time homebuyers accounted for 42% of all homes sold in the first quarter of 2010. That number has declined to 32% in the first three months of this year.