Real Estate Cools Down

Real estate gains came to an abrupt halt in the first quarter of 2006, with the median price of a U.S. home falling 3.3 percent from the fourth quarter of 2005, according to a report released Monday morning.

Prices were basically flat or lower during the quarter as inventories of houses for sale rose and their time spent on the market lengthened, according to a survey of 149 markets by the National Association of Realtors.

Prices overall were still up 10.3 percent from a year earlier. NAR compares prices year-over-year to remove seasonal effects in home prices. Homes sold in the second and third quarters, for example, tend to be of slightly bigger average size and slightly more expensive. But most of the year-over-year gain was recorded in the first two quarters of the 12-month period.

Sixty markets recorded double-digit gains from a year earlier and 16 metro areas experienced price declines.

However, from the fourth quarter of 2005 to the first quarter of 2006, median prices nationwide fell from $225,300 to $217,900, a drop of 3.3 percent. It's the second consecutive quarter that prices showed a sequential decline; in the fourth quarter of 2005, prices fell 1 percent from the third quarter.

Many major metro areas showed slight declines, including Washington, D.C. (down 2.4 percent), Los Angeles (down 0.8 percent) and Chicago (down 0.8 percent).

And some smaller metro areas fell precipitously, including Danville, Ill. (down 17.7 percent) and Akron, Ohio (11.5 percent) .

For the 12-month period, the leading gainer was Phoenix, where prices were up 38.4 percent from a year earlier.

Other big winners were Gainesville, Florida (up 31.9 percent), Ocala , Fla. (30.8 percent), Deltona - Daytona Beach - Ormond Beach, Fla. (25.4 percent) and Eugene, Ore. (25.3 percent).

One unexpected gainer was Waterloo, Iowa, which recorded a 12-month gain of 26.8 percent.

Home prices fell the most in Danville, dropping 11.6 percent from a year earlier. South Bend, Ind. also experienced a double-digit decline, falling 10.2 percent.

Condo prices faired even less well only gaining 5.2 percent nationwide year-over-year. They actually fell 0.8 percent in the West region and gained just 0.8 percent in the Midwest. The biggest regional gainer was in the Northeast, where condo prices gained 9.2 percent.

Phoenix condo prices recorded the largest gains for the year at 38 percent. They fell 5 percent in both Virginia Beach and Palm Bay, Fla.

The report quoted NAR's chief economist David Lereah saying, "With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices."

Lereah is optimistic that the market will soon return to growth. "By the time we report second quarter data, I expect most areas will be returning to normal rates of price growth in the single-digit range."