How Far Have Prices Dropped?

Byline: Ted Cornwell

New York-The myriad of firms and organizations tracking home prices all agree on one thing: values have fallen nationally and by double-digit rates in some regions of the country.

But beyond their agreement on the direction of housing values, there is a widespread disparity in the actual numbers, with the widely followed Case-Shiller home price index and the National Association of Realtors monthly sales data showing much larger declines than repeat-sales indices such as those from the Federal Housing Finance Agency and Freddie Mac.

Real estate economists Michael Sklarz and Norm Miller, co-founders of Collateral Intelligence, think they know why. They say Case-Shiller has exaggerated home price declines for most homeowners.

They argue that Case-Shiller and the NAR, which mix distressed and non-distressed home sales, have overstated price declines in most areas. They also say that as foreclosure sales have increased, the discounts associated with foreclosure prices, historically about 22% below normal market conditions, have increased to 25% to 50% in many markets. That reflects the often-deteriorated condition of REO homes and other drags on the market for distressed properties.

The Collateral Intelligence executives say that because of the widening foreclosure discounts, distressed sales should be examined separately from non-distressed sales when evaluating market conditions and likely future movements in home values.

Mr. Sklarz told MSN that the ...