Home Prices in Record Plunge

News on the housing front continues to be dire and based on the drops in home prices in many areas, the number of homeowners who owe more on their homes than they are now worth continues to grow thereby increasing the likelihood that more families will merely walk away from their homes. In some areas - e.g., Cape Coral, Florida - the prices have dropped 50%. If a home buyer put down 5-10% on their purchase (which is typical for first time buyers), it is easy to see that these folks are in serious trouble. Nationally, the average decline was 9.5% - the biggest decline in over 30 years - which still spells serious trouble for someone who put down 3-5%. Fortunately, in this region, the decline on average has only been 5.9%. As I have said many, many times, until the housing market stops falling, do not expect to see any sustained economic recovery. Here are some highlights from CNN Money (NOTE: the article contains a table for over one hundred markets):

*

NEW YORK (CNNMoney.com) -- Home prices fell 12.4% during the fourth quarter of 2008, the largest year-over-year decline since the National Association of Realtors began keeping comprehensive records in 1979. . . . Prices fell by a record 9.5% in 2008, to $197,100, compared to $217,900 in 2007. In comparison, median home prices dipped a mere 1.6% between 2006 and 2007.

*

Distressed properties, the foreclosures and short sales that have flooded the market, accounted for 45% of all deals. That has driven sales volume up in Nevada, California and other states hit hard by foreclosures, but these heavily discounted homes have also pushed median prices down.

*

"Home markets are weak just about everywhere," said Pat Newport, an analyst with HIS Global Insight, "but in a few states, distressed sales are driving transactions." In Cape Coral-Ft. Myers, Fla., which has the third-highest rate of foreclosure filings in the nation, prices fell a devastating 50.8% for the year, to $110,900 from $225,300. That was the most precipitous plunge for any metro area. In Saginaw, Mich., prices fell 41.4%. In Riverside-San Bernardino, Calif., prices dropped 40.8% and in San Jose, Calif., prices declined 37.7%.

*

Assuming housing provisions in the economic stimulus package are quickly enacted and provide enough encouragement for homebuyers, we could see a quick lift in home sales for the critical spring home-buying season," said Yun. On Thursday, it appeared that the final iteration of the homebuyer's tax credit, which had very different provisions in the House and Senate versions of the stimulus package, was shaping up to be closer to the House bill, according to Yun.

*
That means a credit of $7,500, perhaps $8,000, or 10% of home price for first-time homebuyers. This windfall will not have to be repaid by homebuyers and can be taken off 2008 taxes. NAR estimates that could draw in an additional half-million buyers this year. "It could help reduce the high inventory of homes for sale," said Yun, "and get housing markets moving again. It's hard to get the economy back to growth until that happened."