When Will We See a Home Price Resurgence?
Last week’s news that home prices have fallen for the 12th straight month has many readers wondering when they are going start going back up again.
And just what will it take to turn them around?
Forecasting the long-term direction of any market — stocks, bonds or housing — is a perilous endeavor. But it seems pretty clear that the housing market has not yet hit bottom.
The recent slide in home prices has been very moderate, but it’s only just begun — at least according to most widely watched data on both new and existing homes.
As recently as the second quarter of this year, home prices were still up 3.2 percent from a year ago nationwide, according to Office of Federal Housing Enterprise Oversight (OFHEO).
And after years of double-digit gains in many markets, home prices nationwide are down less than 1 percent, according to the National Association of Realtors.
But there’s evidence that despite low home mortgage costs, home prices are falling faster than the numbers indicate.
Many builders are adding “free” improvements like fancier kitchens and bathrooms to avoid cutting their asking price. Sellers of existing homes are offering incentives — like paying the cost of repairs.
But as the slump continues, it’s going to be harder for sellers to get an original asking price. For one thing, the wave of home loan foreclosures is forcing banks and other lenders to put hundreds of thousands of homes on the market priced for quick sale — usually at below-market prices.
Those sales then become “comps” — or comparable sales used by appraisers and buyers to determine how much a similar house is worth. That puts further pressure on sellers to mark down the price.
Each local housing market is different, and each transaction is unique.
But there’s much evidence that many sellers haven’t yet cut their prices enough to attract buyers. The most telling sign is the level of unsold homes still on the market, which as of July was more than double what is was when the market was roaring ahead.
That backlog is probably one of the best indicators of a market turnaround.
As that number comes down, it’s a sign that prices have reached a point where buyers are coming back into the market in big enough numbers to clear the unsold inventory.
But that may take some time.
Continue reading this MSNBC article on home prices …