According to an article in Smart Money last month foreclosure sales are still flooding the real estate market in America. 35% of all home sales in January were foreclosed homes or for short sales. This amounts to 91,100 properties in January and this number was up 29% from the month before.
The head of a real estate research firm predicted that this will cause a decrease in prices for homes in the next year. Statistics have indeed showed that the median home price has declined 8.5% since June of 2011. This same analyst predicted in the article that home prices are going to go down for a long time to come.
In the city of Las Vegas foreclosures accounted for 59% of all sales and in Sacramento 50% according analysis done by RealtyTrac. Other cities have similar statistics. There is a huge number of foreclosures coming back to the banks currently and these foreclosures are then going back on the market for sale. This flood of foreclosures will continue to press home prices lower in the future according to analysts.
This is exactly what an article in Yahoo Finance stated yesterday. According to that article home prices dropped for the 6th straight month in a row. The Case-Shiller housing price index reports that housing prices dropped in February in 16 out of the 20 cities tracked. Atlanta, Chicago and Cleveland saw the worst declines while San Diego and Phoenix saw price increases. This represents a 35% decline in home prices since the recession hit and home prices are now at 2002 levels.
Another article came out in Reuters that a new wave of foreclosures is expected. In that article they predict that 2012 will be a bigger year for foreclosures than 2011. Just when you thought it was over. But it is not over. Many in the article predict a growing number of foreclosures ahead. They point to the statistics that show that many major banks and many major cities are showing a rise in foreclosures.
The Reuters article points out that the toxic mortgages are now gone. Sub-prime, and balloon payments, and negative amortization mortgages have been foreclosed on or short sold and are no longer in effect. Now we have regular mortgages that are being foreclosed on. Mortgages with normal interest rates and fixed rates for 30 years. Mortgages that are owned by regular working families. Families who are extremely responsible but still can’t afford the mortgage.
These people are being stressed now. They cannot afford the mortgages I argue because the price of everything is going up especially food and energy which are not counted in government inflation statistics. That is what I argue in this blog http://bit.ly/HUNMNJ .
But it is clear that the housing/foreclosure is not ending but may get worse and be with us for some time. I believe that we underestimated the depth of the crisis from the beginning. I had realtor tell me years ago that this was serious. At a realtors convention he was told to expect 10 years of depressed prices in real estate.
The amount of foreclosures is astounding and these all have to be put on the market at some time and they will depress it. Indeed there appears to be a shadow market of these homes that the banks are holding off the market as I argue here http://bit.ly/IUF0k0. When these homes are put on the market instead of being kept off, prices could decline further.
So with home prices declining, foreclosures increasing, and prices of living increasing we have a perfectly bad storm it appears. The government printing of money and the resulting devaluation of currency is increasing prices of food and energy so that people can’t afford their homes. This stresses their finances so they cannot afford their homes which leads to more foreclosures and more homes on the market. We seem to be in a downward spiral economically. Don’t expect housing prices to go up anytime soon. It is also a good time to take care of unneeded unsecured debt do you can afford to pay for your home.
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