Home Prices Plunge Nationally
May 12, 2009 by admin
The National Association of Realtors confirmed today what is on most home owners minds, home values are continuing there decline. Home values nationally dropped by over 13% in the first quarter of 2009, from the first quarter of 2008. The dramatic drop in home prices reflects the effect of a dire period for the economy combined with a huge spike with foreclosed properties.
The rapid drop in home prices is a significant challenge in helping to restore consumer confidence and the economy. The government’s slow response to the rising problems in the housing markets in 2007 and early 2008 helped fuel the crisis in the banking industry. As more Americans lost their jobs and property values continued falling the market turned completely upside down in 2008 as the idea of building wealth through home ownership completely disappeared overnight with the drop in home values. The long term effect of the decline in home values is billions of dollars in lost wealth for homeowners across the country. The government has committed resources to attempting to fix the hem ridging from getting worse by helping to incentivize home buyers with a tax credit up to $8,000 this year and a program from the FOMC to try to keep mortgage rates low. The challenge the government faces moving forward is that most of their programs simply have not worked in the areas needed most, helping to reduce payments and loan balances for home owners who are dramatically underwater thanks to the rapid decline in home values. The hope for homeowners program and the FHA secure mortgage program have both had little to no impact on keeping homeowners from going into foreclosure. The government rolled out another program earlier this year to try and help home owners under water refinance and spur more loan modifications, but with the uptick in job losses it is hard to imagine home foreclosures will be slowing down in the near term.
Declining home values also have inspired many home owners to simply walk away from their properties as they believe they are simply too upside down in value for and making payments based on a mortgage that is potentially hundreds of thousands of dollars more than a home is currently worth is not financially smart in the long run, even with the damage done to ones credit. Real estate is traditionally a regional driven marketplace. Home values may begin to slow down their decline in areas such as Washington DC or Seattle, but the Midwest fueled by the continuing fall out from the auto industry will not likely see a bottom reached until 2010.