Home Prices Improve (Slightly) in Battleground States

Home prices are still down, but improving in key states for pols this November.

PPI’s Battleground Home Values Index for March 2012

At the height of the contentious GOP presidential nomination race, we took a look at home prices in the nation's battleground states, states likely to get a little extra attention from candidates looking to win more votes come general election time.

Some of those states also happened to be the hardest hit by the housing and foreclosure crises, which left deep economic and social wounds that are still healing today.

Back then, battleground states such as Nevada, Florida, Michigan, and Iowa saw double-digit home price declines, with Nevada reporting a more than 40 percent loss in property values.

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Flash forward a few months and things aren't quite as bad. According to the Progressive Policy Institute's Battleground Home Values Index, median home prices in the 16 battleground states have inched up about $860. In some of the traditional "pressure point" states—Florida, Arizona—home prices have seen rebounds of up to 3 percent.

"This flattening implies that the ever important states that will determine the fall election are in the process of putting a floor under falling home prices," Jason Gold, director of the Progressive Policy Institute's "Rethinking U.S. Housing Policy Project," wrote in a recent post.

"Is this good news?" he added. "Extremely. Not until prices stop going down can we start to seriously put a dent into foreclosures, vacancies and depressed demand."

Gold says the brightening outlook is due to efforts by the Obama administration to expand refinancing opportunities for underwater homeowners and the approval of the National Mortgage Settlement, which has provided a dose of clarity to an industry previously in chaos. Money slated for homeowner aid as part of the settlement has started to flow to states, too, which should produce beneficial dividends in coming months.

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Still, a number of obstacles remain. Just this week, concerns were raised again that some states were diverting funds from the settlement originally intended to help homeowners to plug budget gaps instead.

Also, the government's role in the housing market remains a huge question mark. While most experts agree government mortgage giants Fannie Mae and Freddie Mac aren't going anywhere any time soon, just as many agree that their role in the mortgage market should get smaller, not bigger, over the long run.

And above all, significant changes in the health of the economy and job growth have the power to kill off the green shoots the housing market has seen this year.

Meg Handley is a business reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter.