Last month new home prices fell in the largest year-over-year measure since September 2005. Although some buyers still say home prices are out of range, the Associated Press reports that the median price for a new home was $217,100 in September, according to the Commerce Department (DoC).
The report, released this past week, announced that this was the sharpest decline in median home prices since December 1970. The Associated Press reports these numbers emphasized the slowdown in the housing market, while home sales increased by 5.3 percent. This rate translates to a seasonally adjusted annual number of 1,075,000 homes.
Russell Saimons, a financial advisor in the Seattle area, told the Associated Press, he observes that home prices have not come down much but “They’re not increasing like they were a year or two ago.” Saimons expects prices to continue coming down and said that his buying a home, “…probably won’t happen for two or three years.”
The Associated Press reports that some buyers are not holding their breath that home prices will go down further. Latonya Barbery told the Associated Press that, “They’re asking too much for these little shacks.” Barbery, a medical assistant in New Jersey, has been looking for a home for about 18 months.
The extreme number of unsold homes is pressing builders to sell homes differently. The Associated Press reports that builders have to include extras such as granite counter tops and swimming pools in order to sell their homes.
Mortgage rates saw their lowest numbers over the past four decades, according to the Associated Press. The mortgage rate boom powered record-breaking sales of both new and existing homes for the last five years. It supported our overall economy
The current U.S. housing market is expected to get worse if the ABX Index is correct. The index measures the risk of owning bonds backed by home loans to people with poor credit. It has increased 30 percent since August 9, to peak at the highest number since January of this year, according to Bloomberg. The outstanding number of notes tracked by the ABX Index is currently at more than $500 billion.
The current index has lead traders to expect an increasing number of mortgage delinquencies and foreclosures. The number of homes for sale is currently at a 13 year high, according to Bloomberg. Home-loan payments more than 60 days delinquent were at 7.23 in July 2006. The same rate was 5.9 in July 2005. Moody’s Investor Service reports this is the fastest increase since 1998, according to Bloomberg.
Mark Zandi, chief economist at Moody’s Economy.com, told the Associated Press, “The housing market correction is in full swing, but it probably has another year to go before it bottoms out. It is going to be painful because there are a lot of price declines to come.”
Current Federal Reserve Bank (Fed) Chairman Bernanke has said that the current housing decline may cut growth by a full percentage point in the second half of this year. June was the last Fed rate increase in 17 meetings in response to inflation pressures, according to the Associated Press.
Former Fed Chairman Alan Greenspan expects the economy to rebound after seeing a “very weak patch” this summer, according to the Associated Press. Greenspan said this past week, “Most of the negatives in housing are probably behind us, but we still have a way to go” before hitting bottom, as, “We have too much inventory still.”
Moody’s Economy.com predicts that regional housing prices in more than 100 national metropolitan areas will decline. The Northeast, Florida and California are expected to take the hardest hits, as 133 of the total 379 metropolitan areas may suffer. The Los Angeles Times reports that existing home median sales prices are expected to drop by 3.6 percent in 2007.