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And Home Prices Drop By Record Amount

 

According to the National Association of Realtors, whose records go back to 1979, the median U.S. price for an existing single-family home dropped a record 15.6% to $174,100 in the second quarter of this year.

But Home Sales Increased

Meanwhile, sales of new homes increased by 11% for new homes and 3.6% for existing homes, which suggests that it’s a buyer’s market, and that buyers are taking advantage of the falling prices.

The total dollar reduction was $27.8 billion, and the states that were hardest hit were Nevada (15%) and Florida (13%) and a quarter of would-be sellers lowered prices by around 10%.

Which States Reduced Had The Most Reductions?

Connecticut, Massachusetts, Rhode Island and Illinois had the highest share of homes with price reductions of around 33%.

Then came,

Oregon 29%, followed by,

Washington
New Jersey
Minnesota
New Hampshire
Maryland.

Which Cities Were Worst Hit?

Jacksonville, Florida 38%
Portland, Oregon 35%
Milwaukee, Minneapolis, Boston and Seattle 34%
Albuquerque, New Mexico, and Chicago 33%
Detroit; 16%
Las Vegas 15%
Miami 13%
New York City and Phoenix 12%
San Francisco and Los Angeles 10%

* Undeveloped land and foreclosed properties were excluded from the above estimates.

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According to a just published, PMI (Private Mortgage Insurance Co.) interview, “Home prices will fall in more than half of the largest U.S. cities through 2010, as the recession slashes jobs and reduces buying power”.

PMI, is the second largest U.S. mortgage insurer and the company’s chief economist, David Berson, said “21 of the 50 biggest U.S. metropolitan areas have more than a 75% chance of lower home prices in two years. Six others have more than a 50% chance. Prices will lag because of the large number of homes for sale and those that are vacant but not yet on the market, and we’ll see sales start to recover before the job market”.

The present economic collapse was caused by subprime lending to the riskiest U.S. mortgage borrowers, which in turn fueled a five-year housing boom and drove the median U.S. home price to an all-time high of $230,000 in 2006. The housing collapse led to more than $1 trillion in write-downs and credit losses, by the financial institutions that packaged the toxic loans into securities, and then sold them to investors.

Stats issued by the Chicago-based National Association of Realtors show however, that a record number of foreclosures have so far forced overall prices down by 28%, bringing the average price of a house down to $165,400.

Berson went on to say that, “The ten areas with the highest probability of lower prices in 2010, each with a 99 percent chance, include Miami, Fort Lauderdale, Tampa, Orlando and Jacksonville in Florida; Los Angeles, Riverside and Santa Ana in California; Las Vegas and Phoenix. Risky lending and speculators in “sand states” led to rapid property appreciation that is now correcting. The suburbs of New York and D.C. are high-cost areas that had substantial run-ups in prices. They are the next group down from the sand states”.

In depth figures indicate that New York City has a 67% chance of declining prices, whilst Portland, Oregon; Minneapolis-St. Paul; Boston; Atlanta; and San Jose, California all have between a 50% and 70% chance of declining prices.

The city most at risk is New Jersey, and the Edison-New Brunswick area has an 89%, and Newark an 84% likelihood of lower prices over the next two years. Nassau-Suffolk in New York has a 78%; Washington an 88% and Baltimore has an 84% chance.

The areas that are least likely to suffer a drop in house prices are Pittsburgh; Cleveland; Columbus, Ohio; Dallas; Houston and Memphis, Tennessee which is mostly because prices didn’t surge so much or at all during the boom.

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