According to an assortment of financial experts, home values have yet to hit rock bottom and home prices are expected to decline by another 8 percent in 2011's third quarter. The trend is being fueled by a number of factors including high unemployment rates of 9.6 percent (Bureau of Labor Statistics), a weak economy and potential borrowers having their loan applications rejected because of tighter mortgage underwriting procedures.
The information recently released by market analytics company Fiserv, has indicated that economists believe the nation's financial health is still sub-par. It is this trend that will force home prices to decline 7.1 percent between June 30, 2010 and June 30, 2011 and the final drop will devalue home prices by a total of 8 percent.
This news is coming in direct contradiction to the most recent reports that the economy did grow in 2010. According to federal reports, the Great Recession officially ended in 2009, and so far in 2010 the economy has steadily (but meekly grown) by 2 percent. Additionally, the latest S and P/Case-Shiller report indicated that there were five months of gains in the housing market.
From Peak, Home Prices to Decline By 34%
The small bits of good news are not enough. While that information supports the ending of the recession, HuffingtonPost.com reports that a growth rate of 5 percent or higher is needed to reduce the unemployment rate. Analysts believe that the weak job market is the major factor further dragging down home values as there are very few people who have the confidence and means to finance their pursuit of the American Dream of homeownership. Plus, the Case-Shiller report has shown that despite moderate increases earlier this summer, prices in the 20 largest metro areas declined by 2 percent in August.
As a result, it is estimated that trend will further reduce home values. According to Moody's Analytics chief economist, Mark Zandi, the new prediction rate combined with the price drops in the housing market since the real estate bubble first burst "will put the total peak-to-trough decline at 34%" (HuffingtonPost.com). This continued downward spiral is on point with the sad prediction that the housing recovery may take years.
Still a Buyer's Market
While this is disappointing news for the nation at large and home sellers who were hoping to get a break and experience some increase in their home's value, the trend is making this the best house shopping market since the pre-boom years. The nation is filled with a surplus of housing inventory, most of which have been discounted to stay competitive in the market. Qualified home buyers can take advantage of bargain prices on condos, coops, McMansions, architectural gems and even celebrity owned homes.
Aside from the great pricing opportunities, mortgage rates are historically low. Freddie Mac started keeping track of mortgage rate statistics in 1971 and since that time the current average mortgage rate of 2010 has dropped and held steady at under 5 percent. Despite that news, low mortgage rates are shockingly resistible.
Where are the Buyers?
According to survey results provided by Trulia.com, 72 percent of American adults still value homeownership as part of their American Dream. Unfortunately there are a myriad of factors (including struggling to save up for a down-payment) preventing them from jumping on the bandwagon.
While economic uncertainty is one factor, even those with the confidence may not have the numbers to pass the tighter mortgage underwriting rules that were implemented to reduce the risk of another real estate meltdown. To qualify for the best interest rates, mortgage seekers are now required to have credit scores of 720 (previously 680), flawless credit histories with no blemishes and proof of financial resources including bank statements and pay stubs. Lenders are following these rules to the T preventing sales from going through.
