Despite the many billionaires created by property investments in the US, the US domestic housing market is in a bad way right now – with more doom and gloom predicted, at least in the short term.
The latest Case-Schiller Index reports further drops in house prices, by as much as ten percent in some states. California and Florida are leading the price declines with prices in San Diego dropping by 8.3 % this year-to-date. House prices are at a six year low across the country and the average drop was 4.4%, with no end in sight.
“I think the housing market has got another year of very weak sales, falling construction and lower home prices. And all of that assumes that the economy holds together reasonably well and we don’t have a recession,” said Mark Zandi, chief economist at Moody’s Economy.com. The Joint Economic Committee estimates there will be 1.3 million foreclosures from mid-2007 through 2009 in subprime mortgages, loans provided to borrowers with weak credit histories, which will wipe out an estimated $71 billion in housing wealth directly and another $32 billion indirectly by lowering the values of neighboring homes, according to the report by the JEC’s Democratic staff.
The National Association of Realtors is predicting the median price of an existing home- the point where half sell for more and half for less – will fall by 1.5 percent this year, the first price decline on an annual basis on the group’s records going back four decades.
Before the slump ends, Zandi said, he believes median existing home prices using the Realtors’ measurement will fall 10.4 percent, making this the biggest downturn in terms of prices since the Great Depression of the 1930s, when home prices dropped by about one-third.
Commercial property prices seem relatively untouched as yet, but the feeling is that it’s only a matter of time before the subprime crisis bleeds over into the commercial markets. Howestreet have an interesting article entitled the “Rude Awakening “What the banks and politicians don’t want you to know about the credit crisis.”