Epic home price declines
By Justin
Hunter
The 2006 real
estate year has not been kind to investors and sellers.
Each month brings more bad news as sales are setting
records for largest year-over-year declines. However,
for the most part, home prices had remained constant
with the fear that they too would follow the path of
sales.
The fruition is coming true as home prices have started
on a steep down hill path to rival declining sales headlines.
Realty Times columnist, Broderick Perkins, provides
statistical information on the two-sided conundrum dividing
outlooks for both buyers and sellers, in his October
5, 2006 article, “Economy.com Forecasts Historic
Home Price Decline.”
Depending on how you interpret the provided information,
Perkins is calling Moody’s Economy.com report
on predicted home prices, “the gloomiest report
yet.”
“‘Housing
at the Tipping Point - The Outlook for the U.S. Residential
Real Estate Market’ says the nation's housing
market will slip like it hasn't slipped since the Great
Depression, with home price declines in 2007 approaching
20 percent in some areas where the word ‘crash’
could replace ‘soft landing.’”
According to the West Chester, Pa.-based firm, the median
sales price for an existing home will decline in 2007
nationwide by only 3.6 percent, but that would still
be the first full-year decline in home prices since
the 1930s' Great Depression era.
Almost every market
that has sustained double-digit home price percentage
increases over the past several years is showing the
beginning signs of a crumbling cookie.
“‘The highest probability
of price declines is in metro areas throughout California,
and in and around New York City. Probabilities are nearly
as high in the rest of the Northeast Corridor, many
Florida metro areas, and in sundry areas in the Midwest
and Mountain West,’ according to the report's
summary.”
The safest areas for now remain Texas, most of the Southeast
(excluding many Florida markets), the Farm Belt and
the Pacific Northeast. But this is not to say that these
areas will not end up being affected, as they are the
only current areas experiencing price and sales gains,
while a few years ago they were inflating at a much
slower pace than the rest of the nation. They are just
a little behind, but safe for now.
“The greatest annual decline will visit sunny
Cape Coral, FL, where home prices
are forecast to decline 18.6 percent from the peak price.
Other large home price declines will come from Reno,
NV (17.2 percent); Merced, CA (16.1 percent); Stockton,
CA (15.7 percent); Sarasota, FL (14 percent); Naples,
FL (13.8 percent); Tucson, AZ (13.4 percent); Las Vegas,
NV (12.9 percent); Chico, CA (12.6 percent) and Fresno,
CA (12.5 percent), with another 11 metros suffering
double-digit, home price declines.”
Even though these price declines would ordinarily be
good news for buyers and investors, Economy.com urges
you to take caution as there is still uncertainty as
to whether the market is correcting or crashing.
Just a month or two ago, the market was said to be in
the buyer’s favor. By next, year, it may just
be depressing for everyone, as prices and values decline
leaving no given time frame for when increases will
occur again.
“The bright optimism of
home buyers, builders and lenders has abruptly devolved
into increasingly dark pessimism."