Recent hopes by realtors that the housing market crisis had reached a bottom were dashed Wednesday when the S&P Case Shiller Index indicated house prices had continued to fall in January, and basically more than they had dropped in December. Some of the usual suffering suspects were Phoenix and San Francisco where prices fell more than a whopping thirty percent over the last year. The Sonoma area is also still falling and most sales are due to foreclosures, while areas in Marin are beginning to see some light at the end of the tunnel.
Home sellers are alarmed by all the price declines; however the upshot is the National Association of Realtors released figures last week that show the number of sales are up five percent for February. Half of all those sales were from foreclosures and other distressed properties.
Builders are also reporting a slight improvement in new home sales at sharply discounted prices. The average home sale price in February was just over two hundred thousand dollars down from the average of over two hundred and fifty thousand in the same time period last year.
The question most realtors, brokers, homeowners and investors seem to be asking is: when will the housing prices stop falling? One expert exclaims that the day that the foreclosure sales begin to decline is the day that prices will have hit bottom. But he also warns that banks have resumed their efforts to foreclose to the tune of four hundred and fifty thousand foreclosures in the first two months of 2009.
Many states have begun subsidy programs that mimic the federal tax credit of eight thousand dollars for new homebuyers in 2009 and 2010. California is offering a ten thousand dollar credit for new homebuyers in hopes this will boost sales. Experts have anticipated the Obama administration's stimulus plan to reduce the number of households entering foreclosure due to a mortgage modification program in the recovery bill.
The silent market mover of real estate is the underlying health of the national economy. Experts have a dim outlook on the job opportunities in the workplace, which is directly related to the number of past foreclosures, but also a harbinger of further lay offs and ultimately more foreclosures.
The more foreclosures on the banks' dockets the lower the prices will stay, and the harder for home sellers to receive a fair market value of their properties. One so called expert, a retiree from Fannie Mae, points to an up-tick in prices before the unemployment peaked in the early nineteen eighties as an indicator that the housing market may rebound while unemployment remains high. However, there had not been a price bubble bursting preceding the small climb, and this is a much larger bubble than the one in 1989, the last time the housing market sought to correct imbalances in price to income ratio. He seems to forget that we have had record number of foreclosures, the likes of which have never been seen.
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