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Here's an article about how the foreclosures in the United States are effecting the median home price, which is down 4.6% from a year earlier. The article states that these foreclosed properties, or "distressed" properties, are usually sold at 20% cheaper than conventional homes so this is dropping the median cost of homes across the United States.
"We're seeing prices dropping faster than they did in 2010," said Pat Newport, an analyst with IHS Global Insight. "That's troubling. Falling home prices precipitated the recession and are slowing the recovery."
At first I didn't think there was any good out of this, but I believe this can be good news for young people in their 20's or 30's that are looking to buy a home. These foreclosed houses are also attractive to investors that want to clean up the place and turn around and sell it.
The people who do suffer is people who have owned their houses for many years and have seen their house depreciate in value significantly in the last five years. It's unfortunate for these home owners and they have to pay the price for these foreclosed homes. I want to know what everyone else thinks about the continued drop in housing prices due to more foreclosures? Is it necessarily good or bad? What do you think will happen to house prices in the US in the future?
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Just like Greenspan said, forget the technical jargon - at the end of the day, it's always supply and supply and demand. The government should have just bought up all of the the troubled houses. The big problem is this over supply in the housing market . That is not something that turns around quickly. And, as we've seen the depth is much greater than just house prices...it is connected to so many other things.
ReplyDeletePS: 30/30 is legit right now, come on down.
ReplyDeleteI agree with Dane's comment... there is a major over supply of homes on the market right now further hurting a homes price. The good news as you put it is that we 20 and 30 year olds have a buying opportunity of a life time. Unfortunately, we need jobs and money to buy these homes and that is something that is in short supply.
ReplyDeleteI think also that as these houses stay on the market empty they will devalue and not be part of the supply anymore. The houses will fall into disrepair and decrepitude and then no one will want to buy it. I also know that in certain areas if you don't make it look as though it is lived in then the empty house will be stripped one night. All the gutters, the piping will be taken out for their copper. Also buying a foreclosed home would be cheap but it is a long process and you need to make sure you have the time and don't need to move in that house anytime soon. Overall I think House prices will stabilize soon when people realize that they want to buy from the people who have been living in the house rather than from a bank or buy into a vacant house. From what I have witnessed is that houses devalue pretty quickly.
ReplyDeleteChris, I'd buy a house now if I could afford it as well had a job in a city with upward mobility. Prices will drop until it bottoms out and as the boom and bust cycle continues.
ReplyDeleteThere is a lot of blame to go around here. As we have said in class, this problem was caused by greedy Wall Street investors who bought junk mortgages from greedy bankers who were writing mortgages without even verifying whether or not the borrower had a job. Part of the mortgage contract states that if the borrower does not make the mortgage payment, the bank gets the house back. It's part of the contract. The people who didn't have jobs and applied for the mortgages they could never pay are also at fault. Banks are at fault but so are the buyers. Add to that the gov backed agencies (Fannie May and Freddie Mac). Greed led to unsustainable prices and a sub-prime mortgage crisis.
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