Posted by Adam @ 1:28 pm on April 29th 2008

House prices falling, falling, falling

CNN reports some really bad news about house prices over the last year, with double-digit drops in some big markets. This is good news for some of the people that had been priced out of the market and would like to get into it at affordable prices, with two provisos: firstly, this might well screw the general economy and put their own personal finances in the toilet as a result and secondly that getting a mortgage is going to be more expensive than it might have been because of “adverse market” charges and general lender concern (albeit concern that has only really arisen somewhat late in the day).

For most of us, it’s a case of “grit your teeth and smile through the pain”; this might not get better, at least for some people, for some considerable time. In the meantime, foreclosures and increasing economic hardship for many look to be the order of the day.

3 Comments »

  1. I like the way that the story ends with this (in the article, they are links to other CNN pages):

    Foreclosure spike – 112% with no end in sight

    Housing relief efforts slow as pace of foreclosures rises

    Find mortgage rates in your area

    A tribute to American optimism to put that third link after the other two.

    Comment by Adam — 4/29/2008 @ 1:37 pm

  2. My brother in California has put in an offer on a house that’s now appraised at about 70% of its peak-market value. He has been, for about a month, the only bidder on the property.

    The holders of the property are…waiting. For what? For, presumably, the federal government to bail them out, elevating prices to a level at which my brother would have to pay more than the market rate.

    One of the more poisonous aspects of federal interference in the market is that it creates an expectation of more interference to come. This retards economic activity in that everyone is continually waiting around for a better deal to drop on them by deus ex machina means.

    A rotten deal for my brother, to be sure. But can one blame the bank? If they close on the deal and the feds intervene in the mortgage markets a week later, they wind up big losers, through no fault of their own. What an ungodly stupid mess.

    Comment by Rojas — 4/29/2008 @ 2:10 pm

  3. Yeah, it’s been interesting. Actually, that’s the listing price which is 70% of its last sale price–to my knowledge, we don’t know what the actual appraised value is yet, but it’ll be below that list price, in all likelihood.

    This is one of those “short sales” you may have heard about, where the current owners owe more than the house could sell for. If they can’t afford to make payments, normally such a house would go into foreclosure, which costs the foreclosing bank a heap of money in legal fees and rehab on the house–and then they have to sell it, usually at a steep discount.

    In this case (and hundreds of others out here in San Diego area), the current owners are trying to negotiate a deal with their lender where we buy the house, the bank forgives the rest of the debt, and they walk away with no money but also no foreclosure on their credit report. Theoretically, everyone benefits: the owners avoid foreclosure, the bank doesn’t have to go through the costs and hassle of foreclosing and reselling, and we get a house at a nice discount.

    Unfortunately, as Rojas points out, banks have been sitting on these short sale offers for months (whereas regular sales typically close in 30ish days from offer to move-in), waiting for God knows what–maybe federal intervention, as suggested. I understand that it will take them some time to determine if they will be losing or saving money overall in a short sale, but we have literally heard NOTHING in response to our offer in six weeks–and from what our agent says, that is entirely normal right now. It doesn’t make sense to me–the longer this goes on, the more the market is likely to drop (becoming increasingly glutted with foreclosed homes for sale), and the less likely they are to get much for it if they foreclose and sell it.

    I guess it’s their call, though–they’re the ones holding the mortgage, and they’re under no obligation to let it go.

    Comment by Talarohk — 4/29/2008 @ 7:29 pm

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