October 7, 2007
Double-Digit Home Price Drops Not Out of the Question
Double-Digit Home Price Drops Not Out of the Question
Over the next few years, more than three-quarters of the nation's housing markets will suffer some decline in home prices. Many will experience double-digit hits in a forecast that has worsened considerably in recent months.
According to an analysis conducted by Moody's Economy.com, declines will exceed 10 percent in 86 of the 379 largest housing markets. And 290 of the cities will experience price drops of 1 percent or more.
The survey attempted to identify the high and low points of housing prices in each of the markets, some of which started declining from their peak in the third quarter of 2005. All are median prices for single-family houses.
Nationally, Moody's is projecting an average price decline of 7.7 percent. That's a jump from the 6.6 percent total price drop that the company was forecasting in June and more than twice that of last October's forecast of a 3.6 percent price decrease.
So if you're thinking of buying a home, does this mean it's smarter to wait until prices drop further?
Our opinion is, NO! An increase of only 1 percent in the mortgage rate can more than offset any savings you might realize by waiting. In the case of "gambling on interest rates".. waiting for home prices to drop could end up costing you more than you'd save.
Filed under Most Recent Post by Best Buyer's Broker
Comments on Double-Digit Home Price Drops Not Out of the Question »
Chuchundra @ 6:28 pm
Don't be silly.
If mortgage rates shoot up, home prices will drop even more. Home prices and mortgage rates aren't two separate things, they are two sides of the same coin, affordability. People shop for homes based on what they can afford and what they can afford is mostly based on what monthly payment they can handle. If rates go up, their allowable monthly payment will cover a smaller home price so prices must go down. Buyers are driving the market now and they will be for some time.
Nobody should buy a house now unless they absolutely have to or unless they find an unbelievable deal. There's still a lot more air in this bubble.
Best Buyer's Broker @ 6:49 am
Chuchundra,
I have to agree with you on some of what you wrote, but firmly believe that the time is ripe to seriously be out there looking to purchase.
A favorite statement of mine is "Your crystal ball is just as good as my crystal ball."
What I see out there is that more homes are coming on to the market each week. I always recommend that buyers create a list of all the features they would a)need, b)want, and c)wish to have in their new home. With more homes to select from, their need list should be easy to have, their want list could be met and items on their wish list should be available in some homes. The buyer, armed with their list has the ability to get the home they want.
Also, with the aid of a negotiating strategy, or expert advice, the prices out there are very negotiable. Sellers are still asking more what the home is worth, but many are getting desperate. Unless you are out there looking and making offers, you are not going to find the home of your dreams at the price you want to pay.
If you wait, homes may drop a bit more, but once it reaches the point that the buyers begin buying again, the selection will dry up quickly in the lower price ranges and continue to higher ranges. The selections will diminish and sellers will be sticking to their asking price.
A suggestion might be to talk with an Exclusive Buyer Agent who has the expertise to help guide you and answer your question more honestly.
Good Luck with your search.
Ira