Home prices continue sharp descent

[Amerigo Vespucci]

Source: CNN

NEW YORK (CNNMoney.com) -- Single-family home prices dropped 7.7% in the first quarter in the largest year-over-year decline since the National Association of Realtors began reporting prices in 1982.

The median sales price fell to $196,300, down 4.8% compared with the last three months of 2007.

Lawrence Yun, the chief economist of NAR, attributed much of the record decline to liquidity problems dragging down high-priced markets.

"These are highly unusual results because there were very few jumbo loan originations in the latest quarter," he said. "So sales are much slower in high-cost areas."

Read more: http://money.cnn.com/2008/05/12/real_estate/Q12008_home_prices/index.htm

[Eurobabe]

1. Dropping like a rock

So glad I don't own anything right now. Resisted the urge to buy last fall. I think it's going to get alot worse before it gets better, my real estate friends don't believe me. I sold new construction until 2006 and then I left the business. The shit started to hit the fan in September 2005.

[leftyladyfrommo]

2. Oh, I don't think we are any where near the bottom yet.

I was in mortgage lending. I had to back over to the office where I worked last week. The Vice president there told me that loan officers are starving. Nothing is moving out there.

I remember 1978 when the market died. But then interest rates were 18%. Now interest rates are low and the market is still dead. This downturn is much worse.

[Eurobabe]

3. I don't think anyone has any idea how ugly this

is going to get. People who have been in the industry have an inkling, but many are in denial. You should read the emails I get from my agent in VA who keeps telling me there has never been a better time to buy. We just shake our heads, and I write him a polite, "not yet" response.

[leftyladyfrommo]

32. Values are still dropping - not a good time to buy at all.

You could buy and then lose another 10% of value just in the next year. No way to know.

[murielm99]

6. We were trying to sell a house in 1978 and buy another one.

The interest rates were killing everything. I did sell my house in early 1979. We did not take out a mortgage on a new house until 1980. Interest rates here had dropped some.

We refinanced when the interest rates normalized, but not because we wanted to sink all our equity into vacations and improvements. We wanted to save money on interest payments. The mortgage was paid off three years ago, and it is going to stay that way. No borrowing!

[JeanGrey]

18. Us too. First house - 39,9 in 78 sold for 84,9 in 1989. Bought

house for 95K in 90, put fifty grand down, financed for ten years, paid off in 2002. Sold in 2004 for 189,9 (downsized due to health) bought third house outright, with enough left over for a nice nest egg. (third house was 139,9).

Having friends buying houses right and left they can't afford, not us! We paid 139,900 in 2004 and we'll be here until we die. We don't need more than a 1600 square foot ranch with a full basement, two car garage, and a second driveway with a third garage for hubby. Plus I don't have to climb stairs, thank god.

That full basement has come in handy. Several family members in and out plus two homeless people.

[Elspeth]

9. A local realtor I met said there is at least another 15 months of this.

He described certain areas as "a bloodbath."

[closeupready]

15. 15, yes, at a minimum. Six months into a new administration, things will start to change.

n/t

[Elspeth]

24. How do you figure?

Really curious about this. Thanks.

[closeupready]

29. Every new administration makes radical needed changes early on,

so as not to be forced to makes those changes later, when they are up for re-election, and may incur the wrath of voters. And it takes about six months for such changes to have an impact on the economy.

[slackmaster]

31. Interesting analysis

Flagged for future reference.

[Psephos]

27. Realtors are so clairvoyant in 2008, but weren't in 2001, 02, 03, 04, 05, 06... n/t

[leftyladyfrommo]

33. Well, the market was booming for over ten years.

Realtors, loan officers, appraisers, pest control guys, structural engineers, title companies - everyone was just making a killing.

Trouble was the killing lasted long enough that all those young people who had never seen a downturn in the market didn't realize that the market always cycles. They just thought it would go on forever.

I also think that the younger generation that was controlling the mortgage loan market didn't really realize what the consequences of their actions in loosening the credit standards would be. They started trying to make loans to everyone that walked in the door - and made a bunch of money off those people. But in doing so they completely ruined the future market.

I think it will be years before this works its way out again.

[Psephos]

39. Well said n/t

[lark]

38. Both my children out are of the house

but we can't sell due to the downtown in market values, and are stuck with a much larger old house and yard than we need. Luckily we've owned it for awhile, so payment is very reasonable, just don't have the time or energy to maintain it properly. We were always going to sell and buy a small house near the beach when our youngest went to college, now are stuck where we are until the housing market improves. And we are some of the lucky ones because we've owned this house since 1989 and have a decent loan. I pity the folks that didn't know much about mortgages and got adjustable rates on a house at the top of the bubble. They are really hurting.

[redqueen]

4. "So sales are much slower in high-cost areas."

Is this the real 'canary in the coal mine' indicator... that the high-income families, who have done well under bush's mis administration, are now also affected by the recession that's still somehow not really a recession?

[cascadiance]

13. Actually in some cases housing meltdowns like this can cause rents to go UP!

It happened at the end of the dotcom bomb situation up in the Bay Area which is why I left there, and it's been happening here in the San Diego area, though not quite as virulently as it did in the Bay Area.

The problem is this. If for some time the builders have been focusing on the higher end market with newer housing they build when times are good, and suddenly times are bad, that's where the demand really dries up. Those houses stay vacant and drop a lot in price. But that has a spillover effect to the rest of the housing market. Those that might have "bought up" normally into one of these houses are staying put in their lower cost houses, lowering the supply in their marketplace for others who might get in. As you go down the scale of offerings to lower cost housing, that's also where the builders haven't invested in where they might have been able to sell something with the newer market conditions. Those that rent that might have taken those houses that those sitting in them instead of "buying up" are now staying renters too. The more people stay as renters, and the more that stay in their lower priced houses, and the less builders have invested in building in the lower end market, the prices of rentals actually go UP!

When this happens in more expensive areas, that is when people start to leave the area. It happened in the Bay Area at the end of 2000 and 2001. A LOT of people left there then. We also here in San Diego have had more people recently moving away than moving in. People are leaving here now too for places where the cost of living, housing, and salaries are in balance. But as there are less and less places in this country to go when this displacement happens, it becomes more and more prone to collapse. We're getting closer and closer to that midnight hour folks.

The problem we have is for so long we've been living in a government that incentivizes the "ownership society" rather than the "work for a living society". They've lowered capital gains tax, replaced more guaranteed return pensions with more market affected 401ks, retained the mortgage interest deduction and took away the other interest deductions and sales tax deductions we had in the 80's and earlier. They want people living off of their investments (the way they have and where they want to profit more from "doing nothing" and making more from investments than actually working for a salary. Unfortunately society as a whole cannot live like that. People do have to work. And they should be compensated fairly for their work. And if they are, it will translate into a strong society that has a lot of commerce going on, and people not going bankrupt and all of these kinds of crises happening.

[leftyladyfrommo]

35. Around here in Kansas City every market is slower.

Not just the high end. It's all dead.

Another problem is that all the foreclosed properties are pulling the sales prices of surrounding properties down.

Its a real mess.

[KSinTX]

5. I own and am in it for the long haul

The only benefit of all this for me will be when the tax bill starts shrinking. That's going to start happening at lightening speed when all the houses for sale start sitting on the market for longer and longer periods. In fact, several have now converted to rentals but there's a glut of those here. Downside is that vacant houses attract a whole different set of problems.

[customerserviceguy]

25. What makes you think that property tax bills will start shrinking?

Yes, assessed values might drop (although it's way more likely that they'll just drastically slow the increases experienced during the first part of this decade), but that's not going to lower your taxes, especially if everybody else's properties also see the same effect happening.

A unit of government that levies property taxes approves a budget, and the taxes needed to meet that budget are levied in proportion to assessed value. If assessed values stay flat, or decline, then the tax rate per $1K just goes up.

In fact, when properties are in a foreclosure status, taxes can remain unpaid, especially if there's no impound/escrow account set aside to pay them. A hard-strapped lender taking on too many foreclosed homes might decide to let a year or two run on the taxes, using the government as a low-interest lender, in effect. That's going to make a squeeze on governmental budgets, even though they may well collect those taxes plus interest a year or two later. In the meantime, they might make it up from folks who do have the willingness and the capacity to pay.

[KSinTX]

30. I am blessed to be in San Antonio

We continue to expand in new housing starts and because of their competitiveness, there's a diminshing market for existing ones. Because our market was intentionally held in check by the real estate industry here, we don't see quite the level of foreclosures in other areas of the country. On the other hand, people who must move after a short-term ownership find themselves stuck with having to convert to rentals. Trouble is, speculators got burned here trying to replicate their successes in FL, NV & CA and as a result there's now a glut of rentals. These are primarily the vacant homes we face, some of which, I'm sure will go into foreclosure eventually.

[snooper2]

7. Why don't they say, home prices are "correcting"

All the bullshit "Value" over the past 4-5 years on homes mostly on the coasts is speculative bullshit. $150,000 homes going up in value 250% in 3 years...yeah right...

[Mountainman]

16. Depends on your point of view.

For us who are trying to sell since this bubble burst, we are losing equity or wealth. Of course if you don't own a house you probably think prices were too high and now they are correcting.

[snooper2]

36. depends on if you got screwed or not I guess...

I bought my home in 2005 but it was in line with what the price should have been...

I'm in North Texas though and home values have held their own for the most part. I do see some of the newer mcmansion developments have stopped building...

[David__77]

8. Lawrence Yun is a joke.

He's a cheerleader, not an economist. They keep calling the bottom, but we're not there yet. And it's not a disaster, by any means. Prices need to come down to maintain the historical relationship between prices and factors like income, population density, etc. This is the depletion of a speculative bubble.

[MannyGoldstein]

10. In 1970, A Median House Cost ONE Median Year's Salary

Now it's 3-4 years of salary.

Don't know if things will return to the way they were in 1970, but if they do... it'll be interesting.

[Tesha]

11. Not anywhere *I* ever lived they didn't. (NT)

[spinbaby]

12. You oughta see what's happening in time shares

An acquaintance in the time-share resale business tells me they're overloaded with stock. People are trying to unload time shares to pay the mortgage.

[JeanGrey]

19. Time shares were never a good buy. You could always pick

them up cheap after people realized.

[Trillo]

14. Oh, the joys of CDOs and Off Balance Sheet transactions.

Once again, the little guy pays and pays and pays for corporate perversion. Free Market my my!

[slackmaster]

17. OTOH the drop in prices will make houses affordable to a lot of people

I don't believe it's little guys who are being harmed by this.

[JeanGrey]

20. This is the best time EVER to buy a house. If you have a job

and can buy, you will never do better for your money than now. We have young friends who bought a year ago, we begged them to wait, and now they are stuck in a 140,000 tract home when that money would buy them in the 200 thou range now.

[PSPS]

21. No, this is the absolute worst time to buy

Prices will continue to fall at least through 2011, when the largest bubble of toxic option ARM's go through their reset. The majority of those will end up as REO's, short sales or foreclosures.

If you can find a motivated seller who will accept an offer based on rental comps (not sales comps which are still bubbled), go for it. If you pay more, you'll find your equity disappearing over the next few years.

[leftyladyfrommo]

34. Yea, I don't think this is a good time to buy at all.

You don't want to pay $100,000 for a house that will only be worth $90,000 in 12 months - and that could happen.

I think the highend homes are really losing value- their prices are dropping by hundreds of thousands of dollars. Scary.

[redqueen]

37. Well they were so overpriced... complacent Greenspan helped grow the bubble.

I also lay blame on those who got into the 'property ladder' game where homes were 'flipped' quickly to make quick profits.

[Ilsa]

22. ... xcept according to my city's appraisal statement for tax valuation. nt

[slackmaster]

23. I have a cousin in Houston

He's constantly fighting the assessor.

[Ilsa]

28. I run a small company out of my home, a little more profitable than

a MAry Kay enterprise, but medical products. Anyway, they've more than tripled the assessment on my property for my business. Why? Because they can. I can't even find definitions for what they are talking about so I can fight it.

[NMDemDist2]

26. I checked the value of the house I sold in PHX in 7/2006. it's dropped 23% since

I sold

:scared: