Homes under water
America’s battered housing market is heading for a triple-dip and has even further to fall before home prices really hit rock bottom, reports
Les Christie for CNNMoney, Oct. 31, 2011.
According to Fiserv (FISV
), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006
. That means if you had bought a house in 2006 for $300,000, your house will be worth only $195,000 next year.
Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment,
explained David Stiff, Fiserv’s chief economist.
Should home values meet Fiserv’s expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.
The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit
helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.
In the second dip, which was reached last winter, prices were down 33%
before staging a mild rally
that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.
Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.
Earlier this month, RealtyTrac reported the first quarterly increase in foreclosure filings
in three quarters. Even more discouraging: new default notices were up 14%.
There’s also a “shadow inventory” of homes in foreclosure that have yet to go back onto the market.
specter that those foreclosed homes could flood the market at any time and drive prices significantly lower is a huge concern, said Mark Dotzour, an economist for Texas A&M University. “That’s the elephant in the room,” he said,
noting that there are 6 million home currently in shadow inventory.
Many of the regions that will be hardest hit were already beaten up during the previous two dips:
- Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.
- Las Vegas is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).
There will be some winners, however, led by Madera, Calif. and Carson City, Nev., which will each gain 15.5%. That’s some consolation for hard-hit residents: The average home in each of these metro areas has lost more than half its value. Other metro areas Fiserv expects to recover nicely are Yuma, Ariz. (up 9.5%), Yuba City, Calif. (9.2%) and Farmington, N.M. (8.3%).
Even after the housing market begins its comeback in mid-2012, the recovery is predicted to be modest at best. Nationwide, Fiserv is projecting that home prices will climb just 2.4% between June 2012 and June 2013.
The biggest winners are expected to be:
- Ocala, Fla., with a 22.4% spike for the 12 months ending June 30, 2013. Ocala was one of the hardest hit communities in the U.S. over the past several years, with home prices falling some 50%.
- Napa, Calif., which Fiserv projects will improve by 20.9% over that same period.
- Panama City, Fla. (an estimated 18.2% jump).
- Bremerton, Wash. and Carson City, Nev. (both expected to see home prices climb 17.9%).
Some cities will continue to fade:
- Fort Lauderdale, Fla.’s forecast is for a 9.2% drop through next June and another 6.7% the 12 months after that.
- Miami will endure 13.5% and 5.2% declines, respectively
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