Home Prices

Home Prices Rise

While home prices rise consistently month after month,  the growth is still slow and the amount of growth signals anything but a guaranteed sign of improvement.  The only way that the housing market will completely recover is if the economy improves on the whole,  jobs begin to appear again, and real estate transactions occur at market price.

If you subscribe to my blogs, watch my videos, or have ever attended a live event in which I’ve been a speaker, you heard me discuss the importance of becoming a student of the housing market.  As such, anytime that the home prices rise or fall, we should be aware of the act, analyze why this is happening, and implement the best type of real estate strategy that will work in the current economic condition.

Home Prices | August

For the 5th month in a row, home prices rose in August.  Generally such an economic event is a good indicator of economic growth and improvement.  However you don’t see anyone celebrating the news because the rise was ever so slight and, unfortunately, still lower on a year to year basis.  A great place to seek out trends and analysis for the home prices and other news relevant to the housing market is CNN Money, and they have covered real estate every time the home prices rise or fall.  Here’s what they have to say about the top cities and the state of our economy:

A gauge of home prices featuring 20 major cities, the S&P/Case Shiller index, reported Tuesday that prices rose 0.2% in August but were still down 3.8% year over year.  “Even though the [year-over-year] rates are improving, national home prices are still below where they were a year ago,” said David Blitzer, a spokesman for S&P.  Overall, the market is treading water and there doesn’t seem to be any reason to suspect that’s going to change soon.

“As long as the economy remains weak, foreclosures are still a problem and lending standards stay stringent, we’re not going to see much movement in home prices,” said Mike Larson, a real estate analyst for Weiss Research.

So what cities saw their home prices rise most significantly?  Well Washington, D.C. had a 1.6% rise in August.  However, Detroit wore the crown with a 2.4% rise in home prices.  Atlanta on the other hand was down 2.4% in the month of August, and on a year to year scale Atlanta had fallen by 6.3%.  Although Atlanta was the worse drop in August, Minneapolis saw the biggest 12 month drop with a 8.5% fall.  The home prices rose as Obama simultaneously introduced the HARP (Home Affordable Refinance Program) in hopes of helping homeowners keep possession of their properties.  You can read more about that policy in this article.

Home Prices | September 

Did home prices rise in September as well?  Actually yes they did, 5.7% more sales than August.  However on a year to year basis we still fell by 0.9%, which is still an improvement from August, but no sign of stable recovery.  We need to see home prices rise on a year to year level, so what do the analysts predict?  Fiserv, which provides real estate financial analytics to industry, is projecting a further home price decline of 3.6% through the end of June 2012.

If that forecast comes true, it would mean home prices will plumb a new, post-bubble bottom over the next nine months, down 34% from the mid-2006 peak.  http://money.cnn.com/2011/10/25/real_estate/home_prices/index.htm

Home Prices | Failed Policies

The government has tried, unsuccessfully, to intervene, wasting billions of tax payer money in the process.  Their solution to this problem always revolves around refinancing or modifying loans to reflect the state of the current housing market.  The trouble is that refinancing isn’t going to help the housing market.

Ed Mermelstein, a New York-based real estate attorney, broker and developer, doubts that the HARP changes will have much impact on home prices or sales.

“The economy and jobs have to come back. That’s what’s going to help the housing market,” he said.

Larson pointed out that even if they work as planned, HARP’s main focus is helping existing homeowners stay in their homes; it won’t spur new sales.  http://money.cnn.com/2011/10/25/real_estate/home_prices/index.htm

Home Prices | Solutions

The solution to correct the housing market is twofold:

1)  Sell houses at market price

2)  Create competition with banks to jumpstart lending

The short term solution to the housing crisis is to utilize owner financing.  The fact that banks aren’t lending doesn’t mean that there aren’t home buyers who want to buy houses.  Many self-employed people with money in their bank accounts and sub 700 credit scores cannot qualify for a loan but would still make good homeowners.  These individuals are willing to pay market price or above just to be able to obtain a loan.  Motivated home sellers with little, no, or even negative equity would be able to sell their homes to these buyers without paying real estate commissions or closing costs.  These homes, which would otherwise head to auction, could be sold at market price, thus increasing the average home prices, and reviving the economy.

Millionaires are created by providing solutions to problems, and the bigger the problem, the better the solution, the more money you can make.  Putting together ‘unsellable’ houses with ‘unloanable’ buyers is the biggest opportunity to solve problems facing home buyers.

Image attribution: http://money.cnn.com/2011/10/26/real_estate/new_home_sales/index.htm

If you liked ‘Home Prices Rise Slow but Steady’ and would like more information on the Assignment of Mortgage Payments System, please read more blogs by the REI Maverick.