Why Home Prices Will Continue To Fall

Why Home Prices Will Continue To Fall
(posted with permission from http://sane-ramblings.blogspot.com/2011/05/why-home-prices-will-continue-to-fall.html)

U.S. home prices last quarter posted their sharpest drop since 2008, http://online.wsj.com/article/SB10001424052748704810504576309532810406782.html falling 3% even from the prior quarter. And the fall in home prices is accelerating. Why?

The U.S. jobs market is terrible, with roughly 20 million people unemployed or underemployed, which is a huge group not likely to buy homes. At the same time, many others fear losing their jobs and are also unlikely to buy. While still others are buried in credit card and other debt.

Meanwhile, foreclosures are growing rapidly. Fannie Mae and Freddie Mac, government monopolies that buy most mortgages originated in the U.S. are hemorrhaging money. Fannie has lost money 14 of the last 15 quarters and needs another government bailout of $6.5 billion to cover the declining value of its massive foreclosure portfolio. As March ended, Fannie and Freddie owned 218,000 homes, a 1/3 jump from a year earlier.

Sellers understandably want a premium price for their homes but in this real estate market, buyers are balking demanding big discounts. And the overhang of mounting foreclosures gives them leverage to either buy a foreclosure or get a big homeowner discount.

As a 35 year real estate investor, my intent is not to scare you but to inform you so you can make smart decisions. If you are a prospective seller, consult your local real estate professional but price to sell, don't wait around for a higher price. In the near term, if you are getting any offers at all, the next offer you receive, is likely to be lower than the last one.

As long as supply outstrips demand, I'd hate to be either a buye or seller.

in 12 months and/or making the same salary?

...when it comes to actually issuing loans...

Their rates are very low however, despicably low for CDs and the like. A new car loan is at 2.49% right now. Too bad I don't want to buy a new car or have the money for one. :puke:

:kick:

DC area has most of the wealthiest counties in the US and I guess it's about the only place where there are still good-paying jobs.

What does that say about us?

The only place now to earn a living wage is the gov't or one of the industries that owns government. We have turned into a parasitic state that doesn't make anything and doesn't provide the means to live for a good portion of the population.

I predict the whole thing is going to totter and collapse sort of like the USSR did.

It will be worse than the USSR

..and a weak construction industry = a weak economy.

:shrug:



It is still worth over 3X what I paid for it. There have been no foreclosures where I live (it is a modest neighborhood - middle class at best) :shrug:

:wtf:

:kick:

New mortgages are hard to come by. Want a fixed rate, well you better have money down and lots more where that came from. My friend got a mortgage last year and things have picked up in his business now so he wanted to refinance and get a fixed loan. Oops it doesn't look like that is going to happen. He is starting to see why the mortgage reads like a 'when you default on this' document instead of a mechanism to purchase property. As always those with more will get more from the system. Young people and first time buyers are a thing of the past.