In PA, Home Prices Falling Plus Unemployment Rising Could Equal Further Foreclosures

HARRISBURG, Pa., May. 16 /PRNewswire/ --

HARRISBURG, Pa., May 16 /PRNewswire-USNewswire/ -- Recent trends in housing prices in Pennsylvania suggest that larger declines lie ahead, researchers at the Keystone Research Center in Harrisburg said today. And, they added, those price declines, coupled with rising unemployment in the state, raise the risk of additional mortgage delinquencies and home foreclosures in Pennsylvania.

Responding to a release of national and state-level housing data by Freddie Mac, Stephen Herzenberg, an economist with the Keystone Research Center, said the Freddie Mac index for Pennsylvania reveals the first actual decline in housing prices over a 12-month period since 1995. Pennsylvania housing prices fell 1.3 percent between the first quarter of last year and the first quarter of 2008, which is a smaller decline than experienced in 37 states, including five of Pennsylvania's nearest neighbors, Herzenberg noted.

"While housing prices have declined less here than in other states, the trends we're seeing over time are following the national trend," Herzenberg said. "Based on national projections, this implies that larger price declines are in Pennsylvania's future."

Mark Price, a labor economist with the Keystone Research Center, pointed to a summary of current housing market research delivered by Federal Reserve Chair Ben Bernanke earlier this month. "Bernanke argued that rising unemployment and falling home prices are important factors influencing the prevalence of mortgage delinquency and foreclosure," Price said.

According to the Pennsylvania Department of Labor and Industry, unemployment in Pennsylvania rose by 47,000 between April of last year and April of 2008. "So now we have both of those conditions, and thus there is greater risk today of an increase in mortgage delinquencies and foreclosures than there was just a few months ago," Price said.

In January, the Keystone Research Center released the first detailed analysis of the housing market in the commonwealth. A Building Storm: The Housing Market and the Pennsylvania Economy cautioned that although the state fared better than some surrounding states with regard to the collapse of the housing bubble, there was still cause for concern.

"It seems like that is still the case," Herzenberg said.

For more information on the Pennsylvania housing market, visit http://www.keystoneresearch.org/housingmarket/index.html.

The Keystone Research Center is a Harrisburg-based organization and leading source of independent analysis of Pennsylvania's economy and public policy. Much of KRC's research is available free of charge at http://www.keystoneresearch.org.