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Want to Know Why Home Prices Will Continue to Decline?

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Mystery solved?

blame gameIt is reported that “Home prices will likely decline another 8% from Q409 to the end of 2010, reversing recent gains in the market, for a 34% peak-to-trough drop, according to a Moody’s report which faults the “underwhelming” success of the government’s Home Affordable Modification Program (HAMP) as the key driver for the assumption,” according to Housing Wire.

While many are looking forward, others are looking backward, and this finger pointing is the beginning of what we predict will be a year of the blame game.

The difficulty in looking at the overall housing crisis and determining a cause right now is like determining a cause of death of a homicide victim prior to an autopsy. You’ve all seen CSI, right? Just because there is a hand cut off, it doesn’t necessarily mean the victim bled out that way; there may have been poisoning or something wacky, so there is no reason to look at one body part (or in the case of the real estate industry, one indicator) definitively as the cause of trouble without looking at the entire body thoroughly which can only be done after the fact which is why hindsight in economics is 20/20.

HAMP, but what else?

I say this with hesitation because I’ve personally written many articles on the failure of HAMP along with other writers here at AG. I think HAMP is a major factor in the continuing doom and gloom in the real estate sector, but general lending issues, rising foreclosures and shadow inventories also contribute.

What I’m most interested in is what the recovery process will look like? Is there a magic bullet that will actually help homeowners, buyers and sellers or has the global economy doomed this year as Moody’s indicates? What say you?

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15 Comments

15 Comments

  1. Louis Cammarosano

    February 16, 2010 at 11:22 am

    Thanks Lani
    My two cents on why home prices might drop (reverse or non occurrence of some of them could cause a price increase)
    -rising interest rates
    -continued unemployment
    -home purchase to rent ratio still high in some areas
    -cessation of purchase of mortgage backed securities by Fed
    -release of shadow inventory by banks
    -end of stimulus in April
    -possible reduction of interest tax deduction for the “wealthy”
    -Increase of “renter” mentality due to potential buyers seeing the devastating effects of foreclosure
    -tighter lending standards

  2. Aaron Charlton

    February 16, 2010 at 11:36 am

    Hmmm…so I guess if we keep going to the government for solutions to all our problems, we may end up like Venezuela. Perhaps the best route for the government to have taken would have been to stay out of our way, and stop spending all our money on projects that are doomed to fail.

  3. Justin Boland

    February 26, 2010 at 7:24 pm

    Boy, if only “hindsight in economics is 20/20” — then economists could at least agree on things that already happened. Sadly, when it comes to most major financial events you can find at least a dozen competing explanations after the fact…

    Anyway, what’s the magic bullet? I think Short Sales are proving their potential every day. The general public might not be aware of Short Sales and their value — yet — but Realtors have been making an awful lot of noise in the past 24 months about the market barriers that are preventing them from closing on Short Sales that SHOULD be closed.

    As much as I want to disagree with your title, the realist in me knows you are right. Realtors and Entrepreneurs frustrated with the 10,000 small disasters of the Obama administration’s approach can turn to one of his most ironic campaign slogans: “WE ARE THE CHANGE WE’VE BEEN WAITING FOR.”

    Then again, I look forward to being proven wrong on what 2010 will bring from Washington, DC. Effective action would be a welcome change of pace.

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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