The Third Decline in U.S. home prices in three years is driving a pickup in sales as bargain hunters rush to buy before mortgage rates rise… even as home values may slump further.
Foreclosures drive down prices
Mounting foreclosures pushed the median price for a U.S. existing home to $158,800 in January, the lowest level since 2002, according to the National Association of Realtors.
Prices down, but sales predicted up to a four-year high
Still, sales climbed 22 percent from October, the biggest three-month gain since the end of a homebuyer tax credit. The rally began as mortgage rates started to rise from record lows in November and the economic expansion began picking up speed.
Even with the threat of more price declines, home resales probably will gain 6 percent in 2011 to a four-year high, Fannie Mae said.
New home sales may rise 18%
Transactions for new houses may rise 18 percent to a three-year high, after falling to an all-time low in 2010, the company said. Sparse sales in January shrank the new-home share of the market to a record 5.4 percent from 16 percent in 2005.
Third price dip plunges prices 31%
Prices have fallen for seven straight months in the current dip and are 31 percent below their 2006 peak, according to the National Association of Realtors. The decline has exceeded the 27 percent price drop from 1928 to 1933, the worst years of the Great Depression, said Stan Humphries, chief economist of Zillow.
Some buyers still ‘stuck’
Negative equity, or when the value of a house is less than the amount owed, will probably throw a crimp in the sales rebound. Many owners continue to be unable to sell unless they bring money to the table for their ‘underwater’ loans. This keeps some mortgage holders stuck in their current homes… and, waiting for better days ahead.
Source: Bloomberg News