Home Prices Plunge to Nine-Year Low
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."
Most analysts and economists were expecting as much, after recent data from the government and online real estate firm Zillow.com confirmed that the housing market is still ailing.
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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