Well after a two year free fall, home prices in some neighborhoods are finally starting to find a bottom. As values have plummeted to below $10,000 in many areas, competition between overseas, out of state and local buyers is causing multiple offer situations and actually pushing up sale prices. It is becoming the norm for multiple offers on almost every new listing, with some buyers paying almost double the initial list price.
The cause of this is easy to explain. First, many lenders including Fannie Mae, Freddie Mac and eight of the major banks have been on a foreclosure moratorium since Nov. 1st of 2008. This has reduced inventory levels by as much a 50% in some areas. This decline in the total number of listings, coupled with a major increase in cash purchasing from out of state and overseas buyers, along with increasing local buyer activity has created a bottom for many different areas in Southeast, MI. Local buyers, who have really been absent from buying activity for the past 12 months, are finally recognizing the excellent values in the local marketplace.
Older listing inventory, much of which is often in very poor condition, and usually priced way over market, is floundering on the market. These homes frequently are suffering from days on the market exceeding 365 days. In order to sell this aged inventory, banks will need to basically donate these to non-profits, bulk them in packages at a major discount, or sell them for $1.00.
As 70% of last years foreclosures have still not yet hit the MLS, I expect when that when a fresh wave of foreclosures is finally released when the moratorium is lifted, values will again begin the march downward towards $1. Per releases by the MBA, 48% of all subprime mortgages are in default or foreclosure, and with the ALT A loans about to come due, a whole new wave of foreclosures is about to wash across the US landscape. Most ALT A loans are in higher value areas, and those areas have been under assault by drastic price declines, so as many as 75% of existing home owners in these areas are going to be severly under water. This will further exacerbate the foreclosure trend as they won't be able to refinance or sell win time.
And don't forget, commerical foreclosures are close behind, and they loans will be high dollar. Continued declines in consumer spending is forcing many retailers to shut their doors, pulling up stakes and abandoning strip malls and other commercial locations that were having hard times even before the market started to fall out.
Friday, March 27, 2009
Wednesday, January 7, 2009
Because of the ongoing decline in the economy and resulting job losses, you will see continued foreclosure activity for at least the next two years.
I expect home prices in the mid to upper prices ranges plummet e.g. $2.5 million dollar house two years ago, will go for $800,000 today, and $700,000 house will now sell for $350,000. The $350,000 houses will sell for $175,000 to $200,000. And $250,000 houses will sell for $100,000 to $125,000. Excellent bargains for those with solid jobs, and who pay their bills on time.
The low end houses, from $5, 000 to $65,000 will actually stabilize from the increasing competition growing between investors, first time buyers and those people displaced by downsizing out of the short sales and foreclosures. These low end prices will become the norm for the next two years, and once again, you can expect to see excellent bargains, many of which will require just minimum fix up.
You can expect that home values overall will continue to decline with the job market. You see, unemployed people don't buy new cars, new furniture, clothes, or spend a lot of money repairing and decorating homes that they don't own. This will further exacerbate the economic downturn and reduce production as consumers scale back spending money they don't have. Since their credit is now severely tainted, they won't be getting much in the way of new credit to spend with either.
As the average income drops with each new round of layoffs and downsizing continues to haunt the landscape for at least two more years, the average wage will drop to below $13.00 per hour which qualifies a buyer for about $65,000 sale price. That means a two income family will qualify for about $130,000 home. Since the average sale price has fallen from $241,000 to $181,000, we have about 24 months more to go before the majority of two income home buyers will qualify.
At that point, which I expect should come right around the middle of 2011, you should expect to see homes sales stabilize and the markets recover. When the average house price falls below $130,000, purchases will begin to increase, which will then create a demand for jobs as industries hire to fill the demand for consumer goods.
I expect home prices in the mid to upper prices ranges plummet e.g. $2.5 million dollar house two years ago, will go for $800,000 today, and $700,000 house will now sell for $350,000. The $350,000 houses will sell for $175,000 to $200,000. And $250,000 houses will sell for $100,000 to $125,000. Excellent bargains for those with solid jobs, and who pay their bills on time.
The low end houses, from $5, 000 to $65,000 will actually stabilize from the increasing competition growing between investors, first time buyers and those people displaced by downsizing out of the short sales and foreclosures. These low end prices will become the norm for the next two years, and once again, you can expect to see excellent bargains, many of which will require just minimum fix up.
You can expect that home values overall will continue to decline with the job market. You see, unemployed people don't buy new cars, new furniture, clothes, or spend a lot of money repairing and decorating homes that they don't own. This will further exacerbate the economic downturn and reduce production as consumers scale back spending money they don't have. Since their credit is now severely tainted, they won't be getting much in the way of new credit to spend with either.
As the average income drops with each new round of layoffs and downsizing continues to haunt the landscape for at least two more years, the average wage will drop to below $13.00 per hour which qualifies a buyer for about $65,000 sale price. That means a two income family will qualify for about $130,000 home. Since the average sale price has fallen from $241,000 to $181,000, we have about 24 months more to go before the majority of two income home buyers will qualify.
At that point, which I expect should come right around the middle of 2011, you should expect to see homes sales stabilize and the markets recover. When the average house price falls below $130,000, purchases will begin to increase, which will then create a demand for jobs as industries hire to fill the demand for consumer goods.
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