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New York Housing Prices Down Only 12% Since Last Year: What the Report Does Not Take Into Account
October 23, 2009 by Neil · 2 Comments
U.S. home prices declined 10.1 percent in August from a year earlier, less than the 11.6 percent drop in July and the 14.4 percent decline in June. New York home prices fell 11.7% since last August.
According to First American CoreLogic, a mortgage data seller:
1) The U.S. housing market will hit bottom by March 2010 as lower-priced properties recover more quickly than expensive homes.
2) The cumulative drop will be 37 percent from the market peak.
3) Excluding sales of distressed property, the decline will be 24 percent.
Lower-priced properties will most definitely recover more quickly. The FHA is providing ample funding for low- and middle-income homebuyers at very high loan to value ratios. With the help of an $8,000 tax gimmick that will likely be expanded and extended, homebuyers can purchase homes for little or zero down. If these homes come back on the market from defaulting borrowers — and they already are — the housing market will not be coming back anytime soon. Moreover, unemployment and underemployment continue to scale new heights. I think pegging March 2010 as the bottom may be erring on the side of optimism.
Moreover, the cumulative drop is also probably optimistic as well. Seven million units of shadow housing inventory are coming online. Banks are incentivized to foreclose in order to collect special servicing fees, and recover a piece of their otherwise vanishing second mortgage positions. This toxic brew will worsen for the near future, unless fundamental changes are made to bank regulations.
As more homes gain negative equity, and home prices further drop, apartment complexes will be less attractive options for folks who can buy houses at or less than the cost of renting.
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