Home prices are lowest since 2002

NEW YORK (CNNMoney) -- National home prices fell 4% in the fourth quarter of 2011, putting them back at levels last seen in mid-2002.
That's the fifth consecutive annual loss and the biggest decline since 2008, when markets were in free fall and prices plummeted more than
Prices have been falling since they topped out in 2006, and are down 33.8% from their peak, according to the S&P/Case-Shiller national home price index.
"The housing market ended 2011 on a very disappointing note," said David Blitzer, spokesman for S&P. "While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended."
After prices fell sharply in 2007 and 2008, declines over the past three years have been more modest. Many analysts thought markets were bottoming out and would soon stabilize, and even pick up. The last quarter of 2011, when national index prices fell a steep 3.8% from the third quarter, may have dashed those hopes.

0:00 / 1:20 Lowe's shows housing improvement

"While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended," said Blitzer.
Robert Shiller, the Yale economist and co-creator of the Case-Shiller indexes, is more optimistic. Last year, he thought home prices were in danger of falling by up to another 25% before they bottomed out.
On Tuesday, he cited several economic reports as signs that housing could start stabilizing. He also focused on surveys that indicated that Americans are very confident of the long-term prospects for housing as an investment.
During the boom, about 90% of the people he surveyed thought it was a good time to buy. Recently, 92% of people agreed with that statement. Still, Shiller is far from bullish on the housing market.
"We may be on the verge of recovery but we may not," he said.
The S&P/Case-Shiller 20- and 10-city indexes recorded similar sharp declines during the quarter. Among individual cities, Atlanta recorded a 12.8% year-over-year fall, the worst of any city.
Other big losers were Las Vegas, down 8.8%, Chicago which fell 6.5% and Seattle, which declined 5.6%. Detroit, where prices crept up 0.5% for the year, was the only city in the 20-city index to register a gain.

Multi-million dollar foreclosures

In the past five months prices have declined at an annualized rate of more than 6%, according to Dean Baker, director with the Center for Economic and Policy Research, a trend he said is especially troubling. He cites some reasons for hope, however.
"Case-Shiller is a lagging indicator and most of the contracts reflected in this report were signed in August and September," he said. "The latest economic data shows a much brighter picture."
Industrial production has been up and unemployment has dropped.
"The economy is stronger now than in the first half of 2011 and that will filter down to home prices," said Baker.

New home sales exceed expectations

New home sales showed improvement in the latest government report.
NEW YORK (CNNMoney) -- New home sales exceeded forecasts in the latest government readings Friday, another sign of a long-awaited recovery in the battered housing market.
The Census Bureau reported that the pace of new home sales hit a seasonally-adjusted annual rate of 321,000 in January, up from the previous reading for December and better than economists' forecasts. Census also revised the December figure higher to a rate of 324,000, meaning that the pace of sales was about 6% stronger that month than the original estimate.

The supply of new homes for sale once again fell, the 11th straight month the inventory of new homes on the market has been at a record low level. The continued decline in supply comes even as other government readings have shown an increase in housing starts by home builders in recent months.
The tight supply, which was at 151,000 new homes in January, helped to lift prices, as the median price of a new home sold in the month rose slightly to $217,100, up $600 from December.
There are other signs that the long-suffering housing market is finally improving. The pace of sales of existing homes in January was at the highest point since the end of an $8,000 home buyers' tax credit in 2010. Mortgage rates have been at record lows until a slight increase this week.

Those low financing costs, coupled with years of price declines and some improvement in the job market have made home ownership more affordable than it has been in decades.
But home prices are still depressed, hurt by the large inventory of foreclosed homes still on the market. The price of existing homes sold in January fell to a 10-year low.. And even with the slight increase in new home prices in January, prices are still lower than the annual average for 2010 or 2011

0:00 / 1:57 Where it hurts to be a homeowner

'How we're losing our multi-million dollar home'

See inside this million-dollar foreclosure.

NEW YORK (CNNMoney) -- Like millions of Americans, Joanne and John Buchanan are facing foreclosure. But at a value of more than $2 million, the home they stand to lose isn't your average delinquency.
For the Buchanans, it's the dream house they built from the ground up in a resort community near Breckenridge, Colo., in 2003. It took them almost two years and about $2.2 million to build -- and soon they will have to move out
For years, homeowners at the high end of the housing market were able to postpone the foreclosure process, but now multi-million dollar homes are becoming more commonplace in America's foreclosure pipeline. In fact, America's wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country, according to RealtyTrac.
Out of all foreclosure activity, the share of foreclosures on multi-million dollar properties -- or homes valued at more than $2 million -- has jumped by 273% since 2007.
For the Buchanans, losing the six-bedroom estate they helped design was unimaginable at one time, but now it seems unavoidable.
The couple moved to Colorado from California where John had worked as the director of business development at a high-tech Silicon Valley firm. They came seeking a less stressful life. John took a buyout package and the couple opened two wine and tapas restaurants, using their new dream home as collateral.

See inside the Buchanan's $2 million dream home

Things went well, for a while. "In 2008, we were hit up here with the slowdown as much as anybody," John said. But "we were on the wrong end of the market," he said. High-end restaurants like theirs were quickly without customers.
John was forced to shutter the restaurants in a Chapter 7 bankruptcy filing.
Meanwhile other expenses were also piling up, including the couple's mortgage payment, which was more than $7,000 a month. They had gone to their lender, CitiMortgage, to ask them to modify the mortgage on their home, which was then valued at $3 million. But the bank refused.
Eventually, the Buchanans just stopped paying their mortgage. John said he hoped it would get the bank's attention. It has been almost 30 months since they last made a payment, meaning the couple is more than $210,000 behind on their mortgage.
Sean Kevelighan, a spokesman for Citi, said the bank could not comment on specific cases. "Our first priority is to keep families in their homes," he said.
Since 2007, Citi has helped more than 1 million homeowners avoid potential foreclosure, he noted. "Unfortunately, that is not always possible, and some cases proceed to foreclosure," said Kevelighan.
As part of the bankruptcy filing, the Buchanans have agreed to sell their home and hand over the remaining assets to the restaurant lender after Citi recoups the $1.7 million that it is still owed on the mortgage, according to John.
"We had a lot of our savings tied up in the house and we'll end up losing all of that," he said.

0:00 / 2:18 Live in this luxury 'safe' house

If the house doesn't sell soon, CitiMortgage will proceed with a foreclosure, which will further destroy the Buchanan's already damaged credit. But selling is looking less and less like an option: The market for high-end properties in the resort community has largely dried up. The Buchanan's house was first listed for $3.3 million in 2008. Now it's listed for $2.3 million, and there have been very few interested buyers, according to Joan Moats, the listing agent on the property.
"Transactions dropped, sales volume is lower and prices are down 25% to 30% since 2008," Moats said. Houses over the $1 million mark, like the Buchanans' property, are particularly hard to move, she said. "We've reduced it by over a $1 million now -- we're trying to get it sold but I'm racing against the bankruptcy and the foreclosure."
"There's no traffic, there's no market at this level. If we find a buyer they will have difficulty getting a loan," John added. "The foreclosure will happen soon."

Million-dollar foreclosures rise as rich walk away

Click image to see inside 8 multi-million dollar foreclosures.

NEW YORK (CNNMoney) -- Five years after the housing bubble burst, America's wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country -- and many of them are doing so voluntarily.
Over 36,000 homes valued at $1 million or more were foreclosed on -- or at least served with a notice of default -- in 2011, according to data compiled by RealtyTrac, which tracks foreclosures. While that's less than 2% of all foreclosures nationwide, it represents a much bigger share of foreclosure activity than in previous years.

its foreclosed homes

"These properties are accounting for a bigger piece of the foreclosure pie," said Daren Blomquist, vice president of RealtyTrac.
Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115% since 2007 while the share of multi-million dollar foreclosures -- or homes valued at more than $2 million -- jumped by 273%. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21%.
Until recently, many homeowners at the high end of the housing market were able to postpone the foreclosure process, Blomquist explained. With other assets and alternatives, "they had more financial means to hold out against default."
In addition, lenders are typically more amenable to working with homeowners that have other resources, said Ron Shuffield, president of Esslinger-Wooten-Maxwell, a real-estate firm in Miami where homes priced over $1 million represented 9% of all foreclosures last year.

See inside 8 multi-million dollar foreclosures

But with a recovery in the housing market still years away, foreclosure has turned out to be a worthwhile option after all. Saddled with bloated mortgages after a long run up in property values, many high-end homeowners have chosen to pursue a "strategic default." Even though they can afford the monthly mortgage payments, they still decide to walk away from their home because they owe more on the property than it is worth.
"In the lower-priced houses you'll see more people defaulting because they can't afford the payments and it's a choice between feeding their family and paying the mortgage on a home that's under water," said Stuart Vener, a national rere will be an opportunity for buyers to snatch up these impressive houses at bargain basement prices, he said, which could provide a much-needed boost to sales overall. "In a good way, this is going to drive turnover," he said.