In applied statistics, it's called the second derivative -- the basic concept of a derivative can be thought of as how much a quantity is changing at some given point, and a second derivative is the measure of how much that change is itself changing. While it's a somewhat obtuse concept, it describes to a tee what's now being seen in many of the nation's housing markets, according to data issued Wednesday by First American CoreLogic.
While home price declines remain well into the double digits year-over year, some data suggests that the rate of change -- the second derivative of home prices, if you will -- has flattened out, meaning the declines aren't necessarily getting any worse.
For August, CoreLogic found that nominal home prices fell 11.3 percent from one year ago; the company's early work on September data suggests an 11 percent year-over-year price drop. August's home price drop compares to a 10.8 percent annualized price drop in July; economist Mark Fleming at First American CoreLogic has suggested for months that signs of stabilization in the rate of price declines on a yearly comparison basis represents an early indicator of a bottom to housing's pricing freefall.
"For the third month now, the rate of decline has held steady at around 11 percent," he said. That said, the year-over-year numbers for the company's past three available months have looked like this: 10.7 percent annual decline in June, a 10.8 percent annual decline during July, and now an 11.3 percent drop in August. Which may signal an increasing trend moreso than stabilization.
Irrespective of trends through August, forward pricing trends in the nation's housing markets will largely depend on the real economy, and just how severe of a recession the U.S. endures.
"Our projection for pre-foreclosure and foreclosure filings through the end of 2008 remains at approximately 3.2 million, but a significant increase in job losses reported by the government in October is likely to pressure the pre-foreclosure and foreclosure filing projection upward," Fleming said.
"Recent events in the credit markets and financial markets, as well as economic trends, have increased risk facing the housing market. The current assessment is that we expect house prices to maintain their steady state or potentially begin to further accelerate downward in light of the economic pressures. No news currently points to an expectation for an improvement in price levels in the near term," he said.
Thirty-four states recorded nominal price declines during August, with California, Arizona, Nevada and Florida leading the way -- no surprises there. Texas, South Dakota, Vermont and Mississippi stand out as states with house price appreciation. "In particular, the major metropolitan areas of Texas are performing well relative to much of the rest of the country," Fleming suggested.
The nation's worst metropolitan statistical area during August was the Los Angeles-Long Beach-Glendale CA area, which saw prices fall -28.57 percent; the Oakland-Fremont-Hayward MSA wasn't far behind, registering a 28.36 percent drop in the twelve months ended August.