U.S. prices slump as 25% homes reach negative equity

Including distressed sales, national home prices slipped 5.7% in January compared to a year earlier, coming off a 4.7% decline in December. Excluding distressed sales, prices in January were down 1.6%.

“A number of factors continue to dampen any recovery in the housing market,” said Mark Fleming, chief economist with Core Logic. “Negative equity, which limits the mobility of homeowners, weak demand, and the overhang of shadow inventory all continue to exert downward pressure on housing prices.”

He said he expects demand to pick up in the spring.

With distressed sales included, Idaho price dropped the most at 15.7% in January compared to a year earlier. It was followed by Alabama which dropped 12.1%, Arizona at 11%, Oregon at 9.9%, and Utah at 9.8%.

Some states managed to show appreciation in home prices, led by West Virginia at 5.5% and North Dakota at 3.3%.

Core Logic data also showed 11.1 million residential properties were in negative equity at the end of 2010, representing 23.1% of homes, and up from 10.8 million in the previous quarter. Another 2.4 million borrowers in the U.S. had less than 5% equity in the fourth quarter.

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