Houses for sale inventory up from last year.
The stubborn slow economy fueled by high unemployment and a housing market with marked down prices and no more homebuyer tax credits leads to worries over a double-dip recession and the all important question whether now is the time to buy or not. Are we at the bottom or will house prices go down even more?
From their mid-2006 highs, home prices have sunk about 30% on average and in some places, like Las Vegas, prices have fallen more than 60%. And foreclosures are continuing to rise in 2010 even from the 2009 highs, and this puts even more downward pressure in housing prices.
At long last, the market is recording signals that housing could at last be skimming toward the bottom. Prices rose according to the Standard & Poor’s/Case-Shiller composite home price index, ever so modestly, in the recent few months, and a handful of major lenders like GMAC, Bank of America, and JP Morgan Chase are putting on hold foreclosures in 23 states due to record-keeping issues. All of this signals that the declining price trend may stall — at least in the short term.
However, the founder of Housing Research Center LLC, Alex Barron, is still bearish on housing prices. He foresees prices falling another 10 to 30% before housing reaches a bottom. He points out that since the homebuyer tax credit has expired, inventory is increasing. He also projects that home prices will continue to decline as soon as mortgage rates start moving up. “Prices will correct 10% for every 1 percentage point the mortgage rate goes up,” he says.
The increasing number of foreclosures are also putting downward pressure on prices. Barron notes that bank repossessions totaled 718,000 in the first eight months of 2010, up 23% from the record 584,000 during the same period a year ago. He speculates that once the current foreclosure suspension is lifted, a flood of foreclosures could hit the market. That added supply will likely cause another correction in home prices.
