Posted on 08/31/2007 12:08:31 PM PDT by vietvet67
A historic decline in home values comes down to this: Even if you never signed papers on a risky loan during the real estate frenzy, you may now be paying a price.
In recent decades, it has been uncommon for US home prices to fall much, even during recessions. One government measure has never shown a year-over-year decline in its three-decade history.
But the current economy is far from normal – with the housing market in a period of persistent decline at a time when many other economic indicators are positive.
By one index released this week, home prices are down 3.2 percent from a year ago. Clear-cut gauges of US home prices only go back through the 1970s, but that decline probably exceeds any price drop since the Depression, except for one year during World War II. Economists say the trend could continue well into next year.
Net worth is falling for millions of families as a result. If consumers, feeling less wealthy, cut back on spending, the risk of a national recession would rise.
Why are home prices declining, when by many measures today's economy is much healthier than that of the 1930s? Basically, the good times for housing ran for so long, and prices rose so fast at the boom's peak, that it was unsustainable.
(Excerpt) Read more at csmonitor.com ...
My town is doing re-vals this week and despite declining pricing I’m sure to take it in the shorts as all the neighboring towns hiked taxes 5-10% (I’m near Hartford, CT)
Governments can never do with less money. They have made too many future commitments based on anticipated revenues.
They (the average prices) are still going up in Baltimore. All real estate is local. The biggest drops are houses that were overpriced to begin with, $300,000+ generally. They swing the percentages due to the larger numbers. If a house goes from $525,000 in pipe dream ‘06 to $350,000 reality ‘07, that is not always a bad thing.
Our economy is better than is was in the thirties, when we were still recovering from the great depression?
Who’d a thunk it?
Not much to brag about...
Folks I was in the real estate business for 40 years. Prices go up and prices go down. But since WW2 the trend line has been up. I would expect it to continue. Real estate is a cyclical business. Generally each high is higher than the last and each low is higher than the last.
Low prices = buying opportunity. At least if you have managed to save some capital.
Great time to buy-especially condos in Miami. It’s like buying clothes during a sales at Macy’s. The prices will go back up. Unemployment and interest rates are low while wages are high. Perfect storm for rising house values. If you don’t buy now (this winter would be better when desperation really sinks in) you’ll kick yourself later.
My country will cut people’s taxable valuations when they discover a new speicies of avian hog.
I guess property taxes can be expected to follow, since the value of the homes is decreasing.
The run up in prices has been breathtaking. Now it’s time to catch our breath.
Get the list of comparable homes sold in you area and go to tax grievance day. I do it every year. I go in and make the assessor justify his evaluation of my property and how it’s worth more now than last year. They typically try in the 10 % range and I will argue them back to 1-2%. They hate me, and cringe when I come in with my folders and comparable list.
I continue to remind them that the house is not new and that the home requires work and money to keep it sale-ready and that I actually live in the house and don’t keep it in sale-ready condition on a daily basis. Thus, there is actually depreciation in the value of the home until the time of sale.
A pitch-fork and torch march on the assessors office may be in order.
Question: Have you ever seen such a period of easy credit and loan requirements before and will this not, due to its size, temper sales and home value appreciation for an extended period of time?
I doubt it. Home prices in Houston have tightened up in the last three weeks. I think this crisis is about over for most areas.
Unh, maybe prices were just a little TOO HIGH before?
Interest rates have a most salubrious effect on containing the runaway prices on housing - the interest rate on mortgages quivers upward just a bit, the effect on home prices is vastly effected.
Nobody seems to remember the effects of the double-digit home mortgage interest rates back in the late 1970’s and early 1980’s. In some areas, housing lost a third or more of their previous value, and it looked so ruinous there was fear of a real meltdown then. Of course, the house prices were rather modest, then, by today’s standards ($25,000 to $40,000, and then they fell to about $15,000 to $25,000 for the same house, in the span of less than two years).
This was existing housing stock, maybe built 15 to 30 years earlier. There was NO new housing going up in those days, the the few units that were for sale, after being vacant for a year or more after construction, were discounted 15% or more, with all kinds of creative financing just to get around the 11% or 12% first-mortgage rates.
Market correction finally worked, and it will work now. Just stay the H*ll out of the way. Just about all of the people most severely affected will have recovered fully in five years or less.
One government measure has never shown a year-over-year decline in its three-decade history.
I wonder what government measure that was?
Am I the only person who was conscsious in the early 90’s when prices dropped? And they were down for YEARS?
Many local-regional housing markets had, previously (before the down-turn), been witnessing double-digit annual increases in house values for the past five to ten years - THAT WAS UNSUSTAINABLE, THAT WAS ABOVE HISTORIC NORMS and THAT WAS A BUBBLE THAT WAS BOUND TO BURST.
When a historically excessive HIGH goes unchecked for too long, an historically deep cut is bound to follow.
The fall is not due to intrinsic factors of the economy as whole. It is due to the Feds easy-money permission slip for producing the housing bubble, from which the fall, in housing values, was inevitable.
Given the long spell of increases that housing values have had, even current value-reductions do not shave a material amount from the majority of homes (from what they have gained since their current mortgages were originated), because the majority of them are mortgages that originated more than ten or fifteen years ago. In long term value increase, most mortgage holders are still ahead and will remain so as the current bubble is foreclosed and/or refinanced into more stable market levels.
Of course, leave it the liberal media to put the worst possible spin on something by not putting it into its full historic and economic context.
3.2%? That’s it? So if you purchased at $200,000.00 and had it appraised today at $550,000.00, the value is now only $532,400.00. Still not a bad deal. Realtors run the prices up, not the seller. Realtors want bigger commissions for very little work.
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