Have Home Prices Bottomed by Now? 9 comments
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In January, I received some flak from readers when I wrote that home prices should either stabilize or recover in this year.
Five months later, I did a survey of home prices in a few places in New Jersey, California, Florida and New York using sampling and discussions with people I know there.
In Florida, short-sale prices are 75% below the peak prices of 2005 and the houses are getting sold very quickly (though plenty are available still).
In New Jersey, finding short-sale properties is becoming difficult due to an increased number of buyers and bidders. The short-sale prices are around 10% lower than regular sale prices, but are higher than last year's short-sale prices.
Regular home prices in NJ are around 10-15% below last year's prices.
In New York, prices still seem to be going down.
In San Francisco city, prices are only 20-25% below their peak prices in regular sales. Finding short sale properties to like takes a long time and does not seem attractive to many buyers.
Though there is concern about the resetting of loans next year, many buyers should refinance them with low interest rates these days. Better stock market conditions would also give a signal to sellers, who can sustain themselves, to withhold their sales.
It appears to me that the ‘regular sales’ prices have already bottomed at most places.
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This article has 9 comments:
The Case Schiller reports as does Consumer confidence.
Refinancing by the way is a great idea if it gets you better rates, locking in longer term should be seriously considered at the first whiff of interest rate increases. Rates after all are at or near the bottom. How long to lock in is speculative though. If there is an interest rate spike you will want to be secure until it passes. What you don't want is your mortgage to come due for renewal during that spike.
Plenty of homeowners were wiped out in the early 80's when rates went through the roof and they found their monthly payments doubling, even trebling. Something to give serious thought to. And what's the risk anyway. It is not as if you can hold out for rates to come down lower than they already are.
"Though there is concern about the resetting of loans next year, many buyers should refinance them with low interest rates these days. Better stock market conditions would also give a signal to sellers, who can sustain themselves, to withhold their sales."
I wish it were that simple. Some people can, and have refinanced. Current interest rates are a great deal. The problem comes when the loan you are holding is 150% of the curent market value of your home. The banks won't touch it unless you come up with the difference.
I won't be so harsh as to ask what you have been smoking, but I do think you over-simplified your solution.
Don't hold your breath on average home prices going up any time soon....you might blow up.
The great rate opportunity comes with a curse. It assumes the homeowner is ready, willing and able to pay down his/her mortgage despite having (sometimes substantial) negative equity. It's an opportunity to hold on until better days hopefully arrive (read inflation). Have you read Garth Turners remarks by any chance? (Garth@garth.ca). He strongly recommends selling your property, even at a loss and taking the proceeds and investing elsewhere.
US homeowners have been blindsided. They never saw this disaster coming and are unsure how to cope despite a near consensus that the real estate bottom has quite a few periods of losses still ahead of it despite government assurances. Sadly, many of the most stoic will lose their homes with even modest increases in interest rates. And now the proof is in the pudding. The Fed cannot control rates if our creditors start to shift out of Treasuries and Bonds in any significant way. Dollar devaluation ,while needed, will be extremely painful for all debtors and mortgage holders.
I wish there were better news but right now the situation looks dismal.
Cam
On May 26 11:30 AM Radardoc wrote:
> I wish it were that simple. Some people can, and have refinanced.
> Current interest rates are a great deal. The problem comes when
> the loan you are holding is 150% of the current market value of your
> home. The banks won't touch it unless you come up with the difference.
The great rate opportunity comes with a curse. It assumes the homeowner is ready, willing and able to pay down his/her mortgage despite having (sometimes substantial) negative equity. It's an opportunity to hold on until better days hopefully arrive (read inflation). Have you read Garth Turners remarks by any chance? (Garth@garth.ca). He strongly recommends selling your property, even at a loss and taking the proceeds and investing elsewhere.
US homeowners have been blindsided. They never saw this disaster coming and are unsure how to cope despite a near consensus that the real estate bottom has quite a few periods of losses still ahead of it despite government assurances. Sadly, many of the most stoic will lose their homes with even modest increases in interest rates. And now the proof is in the pudding. The Fed cannot control rates if our creditors start to shift out of Treasuries and Bonds in any significant way. Dollar devaluation ,while needed, will be extremely painful for all debtors and mortgage holders.
I wish there were better news but right now the situation looks dismal.
Cam
On May 26 11:30 AM Radardoc wrote:
> I wish it were that simple. Some people can, and have refinanced.
> Current interest rates are a great deal. The problem comes when
> the loan you are holding is 150% of the current market value of your
> home. The banks won't touch it unless you come up with the difference.
Nobody is denying that the prices have fallen compared to last year and if any of the readers were expecting that the prices will not fall in that data, I would question that reader's judgement.
I have written the article in May and felt that home prices in most markets have bottomed now.
Whether the prices have bottomed in most markets in may 2009 can be determined only by comparing the case shiller data about May 2009 and June/July 2009.
I hear the concern that refinancing homes could be difficult and could lead to further problems in the real estate market, but the US government is aware of that and is working full time for solutions with banks to take care of those.
In fact, the banks should be allowing refinancing to people who have been paying on time, unless they want to see another wave of foreclosures.
BTW, the consumer confidence data has shown that it is now moving up, which I had predicted in my last article with information from observations on the street, rather than waiting for the data to be reported about it.
My concern is that if I assume the authors points are valid, I am still left with a conclusion that interest rates have bottomed and will rise, and unemployment is increasing.
I think of real estate as a party and I think it would be ok to be fashionably late.