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Home Prices Continue to Decline Due to Foreclosure and Credit Crunch
Just before Christmas, a report was released stating that in October we saw another record decline in home prices,
falling nearly twenty percent compared to the year before. The study focused on twenty cities and watched each
of their housing markets for more than two consecutive years. October's results showed that all but six of the
cities posted new declines in home prices.
With the bear market in full effect, home prices have dropped to levels last seen in March of 2004. Areas like Phoenix Arizona have watched
home prices plummet almost thirty-three percent, while the San Francisco area has seen prices decline thirty-one percent. The cities that
were a part of the twenty city study is down more than twenty-three percent and in October three new housing markets joined the club posting
double-digit declines in home prices. This proved that even areas that previously had been immune to the drastic declines were no longer
immune.
Much of the recent double-digit declines can be attributed to the fact that we are beginning to finally see the results of banks
tightening their grip on lines of credit and the effect that it is having on the housing market. For the most part, people
were still feeling somewhat optimistic until Lehman Brother filed for bankruptcy on September 15th. To make matters worse, markets that
are stressed have already been inundated with foreclosures and short sales, with homes selling at dramatic pricing declines, which in
turn affects the overall average. Foreclosures continue to be a problem with more than eighty thousand people losing their homes to
foreclosure in just October.
Some experts are saying that prices will not improve in the near future and that average prices may continue to even fall more in the next
few months, due to continued foreclosures and tighter credit standards. Even with mortgage rates at all-time lows, it seems to be doing
more for refinancing that it is for home sales. However, the latter months of the year have always been notoriously lagging in sales
compared to the rest of the year.
New prospective home buyers are required to have a minimum down payment of twenty percent, whereas not too long ago, the same person would have
only had to put down five percent. All this has many people waiting to see what the new incentives might be once President-elect Barack Obama take
office. With hopes of tax incentives and more aggressive foreclosure prevention methods, the new president will have his hands full when trying to
fix the housing market.
Marin Real Estate Blog
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