Move Up Buyers Stymied By Slump In Housing Prices
INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
June 15th, 2009
One key point made by Joel Singer, executive vice president of the California Association of Realtors, in last week’s mid-year economic forecast is the impact declining home prices may have on those wishing to move up to a larger home. Basically, the rapid and steep decline in home prices has wiped out home equity needed to sell then buy another home.
Mortgage interest rates are near historic lows, which has not gone unnoticed by those desiring a larger abode. Then reality sets in. Homeowners who contact their favorite Realtor for an opinion of value are finding their homes are not worth what they had hoped-making a move infeasible. Those that purchased in 2002-2003 may be ready to move up, but their home’s value has dropped back to about what they paid for it. Unless they tendered a large downpayment, they may not have enough equity to cover their mortgage payoff and selling costs with enough left over to make the downpayment and pay closing costs for the replacement home.
In Redding, this may explain why homes priced over $300,000 are moving slowly. The vast majority of sales activity is occurring in the $100,000-$250,000 price bracket. The sales activity drops off a cliff when you look at the $500,000+ segment of the market during the last 3 quarters.
The primary cause for declining prices has been the fallout from the first wave of foreclosures. Median prices in Redding have fallen from a peak of $300,000 in mid-2007 to about $180,000 today. This represents a 40% decline which could easily wipe out any downpayment and appreciation on the plus side of a homes’ balance sheet.
If it makes you feel any better, Monterey and the High Desert areas of California both saw a nearly 70% decline in their median home prices during this same market correction time frame.
Joel hopes banks will not waste any time listing their foreclosed homes for sale. The market seems to have an insatiable demand for distressed properties made even more attractive with ultra-low mortgage interest rates.
Joel’s longer term concerns center on the impact of mounting federal deficits on mortgage interest rates 3-4 years from now. It’s possible we will will look back at this time period as the golden opportunity to buy a home at an affordable price combined with a cheap interest rate-a rare occurrence in my 25 years of listing and selling real estate!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
