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Will home prices fall again?

For many homeowners these days, it's difficult to take a look at real estate listings in their neighborhood. Home prices have fallen by dramatic levels, and some have lost more than half of their value in a short while. If you're in that boat, you're probably wondering if home prices will fall again. The answer is yes, though the crash-and-burn falls of 2008 and 2009 more than likely won't happen again. Right now, it's all about reactions to the market. A recent Business Week article predicts further drops in home values due to what it calls "foreclosure 'overhang'"

Foreclosures will cause U.S. home prices to fall this year as lenders buck federal pressure to modify loans, according to a report from Standard & Poor’s Financial Services.

“The mortgage crisis may be far from over,” Diane Westerback, a managing director at the New York-based firm, wrote in today’s report. “The overhang of homes heading toward liquidation suggests more delinquencies and lower home prices are to come.”

Loan servicers that collect mortgage payments and oversee foreclosures will ramp up attempts to repossess properties after seeing about 70 percent of modifications fail in the last six months, according to Westerback’s study. It will take almost three years to sell all the properties that will be seized by lenders, even if no other mortgages become delinquent, S&P said.

Similarly, a 2009 Ernst & Young report projected home prices to continue to drop slightly over the first six months of 2010, followed by about two years of level prices before they really start gaining traction again. What does this mean for you? If you own a home, hang tight -- recovery will eventually happen. If you are looking to buy and can do securely do so, now is a great time to do it.

Israel Gonzalez
Real Estate Broker
Click here to contact me by email

The views published here are the opinions of the writer and are not a substitute for legal counsel.


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