Image Credit: www.frontdoor.com
This is scary news. According to Deutsche Bank, the percentage of homeowners they expect will owe more than their homes are worth by 2011 is going to be around 48%. They’re basing this on their assessment that home prices are going to continue to decline across the country, along with the feeling that more mortgages will be defaulted upon as more and more people face tenuous financial situations with the increase in unemployment.
An increase in pending home sales in most areas of the country, would seem to indicate that maybe the housing market is poised to fight the declining market to at least a stalemate, and many analysts have been stating that they believe the corner is turning, although I haven’t believed that one myself just yet.
Of course, when you look at news like this, it looks dire everywhere, but that’s actually not the case. The issue is with 9 of the 50 states, where bad loans have crippled both housing and banking. Those states are, in alphabetical order: Arizona, California, Florida, Illinois, Michigan, Nevada, Ohio, Massachusetts, West Virginia, and Wisconsin. Deutsche Bank believes that 90% of all home loans in those states alone will be “underwater”, which of course means the book value is more than the market value of the homes, by 2011.
Sure, we’ve written that we believe that some in the housing market have been grasping at straws, and that the housing market has a long way to go, but throwing out a percentage like 90% is scary to even try to consider, and could be detrimental to any potential recovery that might be occurring. As strange as this might sound, why would a potential buyer, even with incentives like the $8,000 tax credit and other tax credits some states are giving, even want to think about buying a house in an area where, as soon as they buy their home, the worth of their house is going backwards?
Well, this is one of those times where we statistics seem to go counter to each other because just last week, Standard & Poor’s Case-Shiller home price index showed that home prices increased .5% from the previous month, even though it was still 17.1% below the same time last year. This is taking into account some pretty large cities across the country, including Dallas and Cleveland. That, plus areas like Venice Beach, CA, which has actually had the price of homes increase by 15% from May 2009 as compared to May 2008, should lend credence to the possibility that maybe the residential real estate market will turn around by next summer. Maybe banks will come to their senses and work with their customers to try to stop so many foreclosures from occurring.
At least, one can hope.
See more:
New Home Sales Flatten Out in August
Just A Blip for Housing Sales, Or Perhaps Not
Freddie Mac, FHLB, Fannie Mae 2009 Note Calendar
Subscribe to our New Homes Blog!
I just can see homes falling anymore in most parts of the county. Alot of areas are seeing increases
Mike In Dallas´s last blog ..How to find a home quickly in Dallas Fort Worth Texas
its really shocking , most of the people say that market is improving and if that is true the prices should increase instead of declining
I agree with Mike, maybe in a few isolated places there will still be a big problem but for the most part I think we have seen the worst of it.
Having a good property nowadays can really help you in the future, as real estate prices are increasing as time goes by.
I agree, I think home prices have started to level out. I think home owners who are underwater are just a small % who secured funding that was destined to put them upside down in any unfavorable economic times.
Glad you pointed out that this should be isolated to a few states. Things have begun to turn around slightly and all the negative publicity is extremely detrimental to any recovery.
Great post. This is a topic that is still highly important to consider for home buyers, realtors, and banks. This may be tough sledding for the time being but the more credits and poor mortgages that are approved the longer we will be in this rut. I think it’s time to focus on how to get the market back into the black and let people know that they need to save their money and get a home and home loan the right way, so they can have that home for years and years, and they can decide when they want to sell it, not the bank.
The most people buy there home for living many years. They don’t care if theirs home are less worth, than the market price today. They know that the prices are going up again in a couple of year. The only problem I can see is that the banks and Obama together must do something about the many foreclosure.
The Case-Shiller index released this week for July 2009 showed price increases in 18 out of 20 of the major markets. Banks have continued to hold back on release of their foreclosure inventory in San Diego, and demand for homes exceeds supply in most housing categories. But there is continued downward pressure at the upper end.
San Diego Homes´s last blog ..La Jolla Homes Most Pricey In U.S.