Housing prices to decline more
By Melissa Wirkus
As our housing market
continues to cool, it seems as though there is constant
discussion over what is going to happen next. Everyone
thinks they can see into the future, or at least want
to take their stab at it.
Yet amidst all of the soothsayers who believe they
know exactly what is going to happen to both our economy
and housing and real estate markets, there are people
who actually make a living forecasting these types
of things.
One such company is Moody’s Economy.com, and
their recent report does not give us good news for
the housing market, especially if you are a seller.
An October 4, 2006 article written by The Associated
Press and featured in The Los Angeles Times, “Housing
prices to drop, report says,” discusses how
our market
looks like it will continue to cool before it heats
up again.
While some people have been trying to be optimistic
about our outlook, Moody’s offers the direst
outlook yet.
While prices
have been slowly declining, but not anything significant,
August presented us with the first decline in the
median price of homes in over 11 years. Most analyst
thought things were going to get better from there.
But the new report predicts things to get even worse
than this.
“Housing prices, slumping after a five-year
boom, are projected to decline in more than 100 of
the nation's metropolitan areas, with the Northeast,
Florida and California among the areas hardest hit.”
“The forecast by Moody's Economy.com, a private
research firm owned by Moody's Corp., presents one
of the starkest views yet of the housing slowdown
that has been gathering force in recent months.”
The report says the sale price for an existing home
will decline 3.6% in 2007. This is bad news since
we have not seen a price decline over an entire year
since the Great Depression in the 1930s.
“The report projected that 133 of the nation's
379 metropolitan areas would suffer price declines.
Those metropolitan areas with declining prices account
for nearly one-half of the value of the nation's stock
of single-family homes.”
Of course the price declines are worse in the area
that experienced the highest home value appreciation
– California. This is a classic example of what
comes up must come down. Florida and Illinois are
also going to experience big price declines, some
areas even bigger than the ones mentioned below.
“In Southern California, the report predicted
declines of 11.4% in Riverside and San Bernardino
counties, 10% in Orange County, 8.5% in San Diego
County and 4.8% in Los Angeles County. The price declines
represent quite a contrast from the last five years
when low mortgage
rates pushed sales to five consecutive annual records
and prices in the hottest sales areas skyrocketed.”
The firm predicts that prices will probably take a
while to correct themselves, and we will probably
continue seeing declines well into next year.
“‘Prices are going to go down and stay
down for awhile. It will take at least a couple of
years to work off the excesses of the last decade,’
said Mark Zandi, chief economist at Economy.com and
the principal author of the report."