Although home prices continued to stabilize in November, real estate experts believe we have another 5 or 10 percent of declines in store before values finally hit bottom. Home prices in 20 major cities declined 5.3 percent in
After the historic housing crash dragged real estate values down nearly 33 percent from the second quarter of 2006 through April of 2009, prices in 20 major U.S. cities have stabilized since. The improvement is rooted in several factors. First, lower prices have made home buying more affordable to many Americans who were priced out of the market in the boom years. Second, a Federal Reserve asset-purchase program has pushed mortgage rates down to near historic lows. Rates on 30-year, fixed mortgages hit 4.88 in November of 2009. Meanwhile, Uncle Sam's
But a handful of market forces may work to bring prices lower from here. First, inventory levels remain elevated, says
And more inventory is on the way. Even if home sales pick up, the market will have to chew through additional properties that will arrive via foreclosure. "We see a big backlog of distressed properties that could come on the market in the next several quarters," said
At the same time, the Fed program that has been instrumental in driving down mortgage rates is slated to expire at the end of the first quarter. Although the Fed could always resurrect the program if mortgage rates get too high, most analysts expect rates to climb from the rock-bottom levels consumers have enjoyed over the past year. Higher rates could siphon off housing demand and create downward pressure on home prices.
Finally, the November Case-Shiller report "probably reflects residual effects of the homebuyer tax credit, which lifted prices in 2009," economists at
But the record 17 percent monthly drop in existing home sales recorded in December suggests prices may face renewed downward pressure in the wake of the tax-credit induced jump. "Demand has tapered off since the first tax credit expired, and the second tax credit, up to now, is having minimal effects,"
Chen, of Moody's Economy.com, suggests prices will drop even further. She projects a decline of 11 percent from current levels before prices hit bottom in the third quarter of 2010.
Predicting the Fed's Next Move
The Federal Reserve didn't pull out any surprises when it blandly announced that it will keep interest rates near zero as the economy continues to recover. But even as the Fed remains fairly tight-lipped about when it will begin ratcheting up rates, economists have been quick to speculate about what's in store. Here are some predictions
Home Sales Tank: What it Means for You
Existing home sales plunged in December, falling nearly 17 percent from November in their largest month-over-month drop since record-keeping began. December's inventory represented a 7.2-month supply of unsold homes, notably higher than the 6.5-month supply in November. Here's a look at what the December existing home sales report means for homeowners, home sellers, and home buyers
Obama - Trashing the Job Makers
Victor Davis Hanson
A year ago Obama inherited a recession brought on by the collapse of the housing bubble. The crash was made worse by recklessness on Wall Street. Job losses followed, and in response, Obama pushed through an epic stimulus bill. Yet despite the stimulus, unemployment soared from 7.6 percent to 10 percent. Now, an embarrassed administration continues to cite jobs saved, rather than jobs lost
Prosperity Isn't Coming Without Structural Rebalancing
President Barack Obama did a fine job with his first State of the Union address. His basic theses were: The middle-class is suffering. We must create more jobs. Banks have to pay more. Democrats and Republicans should get along. Nice. But to reignite a constituency for a progressive vision, Obama should be talking in broader strokes.
The Economy, Jobs and Justice
The effort to save America's financial system and big banks has succeeded. However, the clot in financing remains. Finance is the blood of the economy. When there is a clot, the economy can't work and people suffer. Republicans contewnd that Obama's recovery plan has failed. Yet, they want to prescribe the same poison that created the breakdown in the first place.
Financial Fat Cats
(c) Matt Davies
Rising Yachts Lift No Tides
The government argued that they had to resuscitate the banks in order to save the U.S. economy. So, they rescued the banks not to save the banks, but to save the economy. It 'worked.' Banks are back, making profits and gearing up bonuses. However, unemployment and home foreclosures are rising and personal bankruptcies are at record levels. Obviously, there is a fundamental disconnect ...
Global Economy: 7 Countries Spooking Investors
Despite federal spending consuming 27.2 percent of GDP, the United States maintains a Aaa rating. But you can't say the same about many countries in both the developed and developing world where continued fallout from the economic crisis is hurting their credit ratings. As a result, investors have viewed the economic situations in these countries as increasingly risky bets.
Foreclosure tallies continue to break records and even more homeowners appear headed for foreclosure this year. However, as the housing crisis rumbles forward, an additional driver of home foreclosures has become clear: Strategic Defaults -- borrowers able to pay their mortgage are simply walking away because they believe it's best for their finances
Wall Street CEOs: The Mea Culpa That Wasn't
Here is the testimony I would have liked to have heard from the CEOs of Wall Street's largest banks -- institutions whose irresponsibility and greed nearly brought down the economy
Let Us All Now Bail Out the States
Most states must balance their budgets by constitutional stipulation -- a concept also viewed with a federal sneer. In the depression year of 2009, the feds bailed out the states to the tune of $87 billion. In the current fiscal year, state budget shortfalls are expected to total about $180 billion, with a like amount (or more) anticipated for fiscal 2011.
Detroit - Who's Your Tiger
In the last 18 months, the auto industry has become something bigger than just the buying and selling of cars. It has become an ideological ground zero, a tug of war with many hands on the rope, labor, manufacturing, nationalism, elitism, environmentalism, jobs, the survival of a shrinking but vital American city: Detroit
Politics Behind Hugo Chavez's Currency Devaluation
A lot has been written in recent days about the economic impact of drastic devaluation of the Venezuelan currency announced by Venezuela's authoritarian-populist President Hugo Chávez. But the measure's political impact may be just as important, if not more.
Home Prices Stabilize Further, But More Drops May Be in Store | Luke Mullins
(c) 2010 Luke Mullins