Home Values Continue To Drop

Jan 13th, 2008 @ 4:41 PM by Alden Smith

You read it online. You see it on the evening news.  Fixed rate mortgages are at an all time low.  Yet, houses are not selling.  People are not refinancing.  I read in a comment today on a mortgage article that the mortgage lenders advising to get a mortgage now because of rates being so low is just “a hard sell.”  Let’s look at some facts.

Value of Homes

Values of homes are at a low now, with the median price dropping off considerable.  People cannot afford to sell a home that they have a lot invested in for fear of loss of equity.  Lenders are either making it much tougher to get a loan, or waffle when it comes time to go to the table.  Topping everything off is an unemployment rate that is higher than it has been in many a year.

According to DataQuick Information Services, the price of a single family detached home has peaked at $599,000.00.  This figure is derived by a formula that takes sales on both sides of the figure and equals them out.  All told, the drop has been 11.5%, no matter how you look at it.  If you have been in a home for 20 years, have done only minor remodels, and have not sunk a ton of money into the property, you would be lucky to break even.  Although that is a broad statement, and not backed up by data, I think that a lot of people have this opinion right now.

Market Activity

There have been fewer applications for mortgages on homes.  People seem to be sitting on their money and waiting for things to improve.  Homes currently for sale have been reduced drastically in price, yet continue not to sell.  Of the zip codes reported on by DataQuick for California, only 52 reported resales of 35 single family homes in October and November.  Of these, 32 had dropped over 10% in value on a square foot basis, and 10 reported resales were down 20% in value.

Disposable Mortgages

In research for the article I find that people are no longer considering the home as top priority in their financial priorities.  The report I read stated that people are considering non-mortgage debts to be of greater priority to them, and are walking away from mortgages that they can no longer pay.  If that trend continues, more troubles are surely ahead for the mortgage market.  All we can do is wait and see.

One Response to “Home Values Continue To Drop”

1. jon mortgage says:

   January 15, 2008 at 9:45 am

   We need the consumers confidence to rise, people want to feel secure.