The median price for a home in Cape Coral, Florida has dropped >30% YoY; Cape Coral
Las Vegas's median home prices are now down 32% YoY: Las Vegas
Sacramento, California down 32.3% YoY: Sacramento
Orange County, California is down 33% YoY: Orange County
Riverside California is down a whopping 42% YoY: Riverside
For other Cities around the nation: Housingtracker.net
So, how low will prices go?
Answer: When monthly PIT&I for a new home mortgage, plus any association fees equals or falls below the rent costs for the same home, we will be at/or very close to the bottom - and we ain't there yet!
By that time, millions will have lost their homes through foreclosure, tens of millions more will have wrecked credit, unemployment will be raging, the cost of living will be much higher, credit markets will be tighter, existing home inventories will be massive, and few (due to said credit or employment issues) will be able to secure a new mortgage - even at these low prices.
In the shorter term: Nehemiah - a seller funded FHA downpayment assistance program used by ~ 40% of buyers today - ends on Oct 1st (~21 days from now): Down payment assistance program to end.
The YoY figures above prove it's quite brutal out there now, but the end of this program may be one of the final nails in the housing market coffin.
So, if you've been sitting on the sidelines up to now and you're getting itchy - thinking about jumping in soon, you may want to seriously consider the issues mentioned above before pulling the trigger.
Bottom line: Home prices still have a way to fall.
Regards
6 comments:
Randy,
First off I wanted to say how much I have enjoyed your blog.
Keep up the great work!
Regarding FHA and Nehemiah or American Dream or the countless others that offer the down payment assistance money, they are a total scam and fly in the face of FHA's rule that a buyer cannot receive their down payment money from a seller. (Unless it is a gift of equity from a family member)
The fact that FHA has allowed these programs to continue for all these years is fraudulent.
FHA should either decide that they want 100% LTV loans (which they had planned on doing a while back) or cancel these 'Down payment Assistance' programs once and for all.
I don’t know how many people understand exactly how these work but, to use the phrase of the day, it is like putting lipstick on a pig, but it is still a pig.
You can pretty much figure that most of the FHA loans made after the introduction of the seller financed down payment assistance loans were made at anywhere from 103-115% of the value of the homes. Why? Because the buyer could get that much from the seller to pay for closing costs and down payment.
So, you are selling your house to someone and all you really want to get is $100,000 for it. FHA buyer comes along and wants you to pay his closing costs (up to 6% of the sales price) and 3% for the down payment (via Nehemiah who profits several hundred dollars for printing a couple papers and wiring money back and forth).
So, if you as a seller just add this cost to the top of your real asking price and presto! Instant sale and inflated home value and immediate negative equity loan for the buyer.
In 1997 this stuff did not exist. In 2007 when I finally got out of the business, it was absolutely running rampant. Also, there were all kinds of mutations of this stuff and even non conforming lenders making the worst of the worst quality loans with seller paid down payments. Then there were the totally hidden variety of seller paid down payments where money was laundered in any number of interesting ways to appear that the borrower was putting down a large down payment which of course wasn’t real.
It is unbelievable how out of control the industry got so fast. No one should bother to try to predict how much farther house values will fall because our entire dollar based financial system is so far gone, by the time this mess is over, I don’t think people will be valuing anything in dollars anymore.
Mogwaihunter,
Sorry took so long to reply. I'm out of town on business and just now getting a chance to check in.
Appreciate the kind words and I agree with all you have said.
*A Total Scam*
Thanks for posting
Randy
This is no surprise for me. As I am sure that these are due to economic crisis and I am sure once we overcome this ongoing economic crisis we can solve two current problems i.e. unemployment and home prices.
Because of the current economic status there are many foreclosure deals today.Thus Foreclosure real estate investment has become very common today.
A hard fall in housing was in store.
Not a bad post
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