The S&P Case Shiller Home Price Indices are out and the news is grim: home prices nationally are now at nine-year lows. Yup, we are back to mid-2002 levels and I would expect further declines in the months ahead.
According to the data collected through March 2011, the National Home Price Index "declined by 4.2% in the first quarter of 2011, after having fallen 3.6% in the fourth quarter of 2010. The National Index hit a new recession low with the first quarter's data and posted an annual decline of 5.1% versus the first quarter of 2010."
Consider these facts:
- Home prices doubled between 2000 and 2006, fueled by a massive credit bubble (hat tip to the Fed for watching idly as the bubble gained steam, but did nothing about it).
- The government's first-time and move-up home buyer tax credits created an illusion of a bottom. We now know that the program simply delayed the pain.
- According to Calculated Risk, there are over 6.33 million loans delinquent or in foreclosure, so the downward pressure on house prices will continue.
- Zillow says that 28.4 percent of single-family homeowners with mortgages were underwater at the end of Q1, meaning they owe more on their mortgages then their homes are worth. That removes nearly 30 percent of would-be, move-up buyers from the market.
- Although mortgage rates are at 2011 lows, it's still hard to qualify for a loan.
- The unemployment rate continues to hover at 9 percent and incomes haven't kept pace with inflation.
Why not wait? Because hopefully you are making a long-term investment in a house, not looking to flip it for a quick buck. If that's the case, you don't need to buy the absolute bottom in the market--you just need to find a place you can call home.
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