So, is it good or bad news that home prices have –as Bloomberg.com puts it–”dropped the most on record in the first quarter from a year earlier?”
Depends how you look at it.
On the one hand, the lower prices mean that some people who might not have been able to buy homes before can do so now. But, on the other hand, the continued fall in prices–especially in places such as California and Flordia–are the result of more and more foreclosed properties now available.
The National Association of Realtors is reporting today that the median prices fell 14 percent and went down in 134 of 152 metro area, says the Bloomberg posting.
Most experts agree that any true economic recovery will be built on the foundation of a revitalized–or at least, stabilized–real estate market.
For that to happen, though, we would have to start seeing a real upswing in the buying of homes that are not being sold off as toxic assests by banks. That does not appear to be happening as yet.
In order for that to occur, people will have to start feeling more secure about their economic future and, more important, banks and other lending institutions will have to start freeing up enough credit to encourage would-be home buyers to go after properties that are more expensive than the ones priced for fire sale.
Only then will we begin to see the building industry show new signs of life with a resultant uptick in new housing construction. Those are the homes that generate countless jobs for all sorts of contractors. The sale of existing, foreclosed homes does just about zero in that regard and contribute little, if at all, to a refreshing of the national economy.
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{ 6 comments… read them below or add one }
It’s funny… Whenever other prices decline, such as food, clothing, gasoline, etc. the media touts it as a great event. So why should real estate be any different?
Lower prices are good. Good for new homeowners. Good for investors. Like you say, the only way to get the homebuilders and their construction crews back to work is if people start taking out loans again. Before they do that, we need more realistic housing prices…
It’s not that lower prices in and of themselves are a bad thing…they are not. Rather, it is the reason why the prices are so low…it is a symptom of a patient still at death’s door.
So, yes, lower prices for housing would be a very good thing…but it has to be for the right and not wrong reasons–in this case, because more and more people are losing their jobs and foreclosure rates continue to rise.
charles’s last blog post: Recession Ending, Some Say; We’re Being Played For Fools!
Businesses are downsizing. I hear the there are a lot of vacancies in the Sears Tower — because it was a possible target during 911 people don’t want to lease there.
Why do so many people look to real estate to lead us out of the recession? Even Charles McMillan says this. I wrote about it here…
http://www.myonehundredthings.com/2009/04/my-response-nar-president-charles-mcmillan/
Anyone who believes this needs to look at history. The sector that lead us into a recession is almost always the LAST sector to recover.
Christian’s last blog post: Tony Robbins Talks About the Economy and Opportunity
Yes, All the Banks and Financial Institutions are not encouraging lending against RE. The credit policy of RBI also do the same except for the Home Loan. The input costs also climbing northwards not found in the past decades.
Let’s face it, housing prices were out of control. Too bad it had to get so bad.
The first-time home buyers tax credit does seem to be stimulating the real estate market in New Jersey. I understand they are now allowing the buyers to use the tax credit towards their down payment.