I just gave an interview to a reporter about last year's numbers for the state of Connecticut. The Commercial Record showed that sales were about even with 2008, while prices were down about 10% from 2008 to 2009. She wanted to know whether that surprised me. It did not.
The above results are typical for markets that are in moderate recovery. When they decline, they decline first in units and then in prices. On the way back up, we see units increasing before we see prices returning. This is also because, when the economy is not strong, it's people at the lower end of the price spectrum who are most likely to buy or sell property, either because they are first-time homebuyers, or because they are forced to sell. These reasons account for the decline caused by a change in the mix of units changing hands.
The other piece of the decline is caused by the value of the same house going down in this market. Most houses, especially when they are competing with foreclosure sales, are selling for less than they would have a year ago. That's the part of the decline I would call same-sale price loss.
If you add those two explanations together, you can see that the 1% a month loss in value that I've been blogging about is not going to go away any time soon. On the other hand, we should see unit sales beginning to rise faster than they did in 2009, particularly as long as the government continues to give incentives to homebuyers. And that's good news.