Will Prices Continue To Decline?

Services for Real Estate Pros with Real Estate Entrepreneur

FORECLOSURE DISCOUNTS: Even with the Feds trying to help homeowners 'keep their homes' (in other words, help banks 'save their shirts'), only a small percentage of people are qualifying for loan modifications. Then, after qualifying, only a small percentage are maintaining their new loan. As a result, many homes sell at discounted prices before auction, at auction, or they sit vacant which increases the supply. Home values decline.

LENDING STANDARDS: When it was easier to borrow money, more people baught homes, which decreased the supply. As we speak, lenders and federal regulators are making it tougher to borrow money, so fewer homes are selling. The federal regulations that were just instituted (such as restricting when a lender can institute a prepayment penalty) will force lenders to raise interest rates to cover their increased risk. Higher interest rates means that homebuyers can't afford higher prices. Home values decline.

MORE BUILDING: Obviously building has decreased and future building will decrease even more. However, there are still some developments that began before the big crash, so more units are still being added to the market. Home values decline.

INFLATION: The dollar is losing value. As the Fed continues to bail out banks, send out stimulous checks, and fund 'defense', then it will inevitably borrow from other countries and print it's own money. As the value of a dollar deceases over time, then it will take more dollars to buy a home of tomorrow then it will to buy a home of today. Home values increase.

So what influences will win out? Will prices increase or decrease? Only time will tell.

Comments (3)

Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor


Lots of good deals out there and the investors are really getting some great deals. The investors will be the real winners in this marketplace(longterm).

Jul 16, 2008 04:21 AM
John Walters
Frank Rubi Real Estate - Slidell, LA
Licensed in Louisiana

I think they will.  If I were a renter I would wait at least until next Spring.  Jeremy that cartoon picture of you looks a lot like Lenin.

Jul 16, 2008 04:23 AM
Michael Wayne Jackson
Coldwell Banker - Novato, CA
Broker - Seniors Real Estate Specialist Novato

I think prices will continue to go down well into next year but it's still a good time to buy wit hthe current rates.

Jul 16, 2008 04:47 AM