Sellers cutting prices on homes up to 50%

September 7, 2010 by · Leave a Comment
Filed under: Real Estate News 

This is actually good news if you look at the long term effects of these price reductions.  Prices need to find a sustainable level that reflect what people can afford each month on a mortgage depending on the market.   Prices are still very elevated from pre-bubble days and still have some ways to come down.

The Obama administration also released a new program today to help underwater home owners that have loan principles that are still higher than the actual value of the home.  The program calls for the lenders to refinance the loan and reduce the principle amount in exchange for a FHA guarantee.  The lenders need to lower the principle by atleast 10% of the previous note.

As we should know by now that all White House administration are conservative and optimistic in all projection they officially give.  If they say prices need to come down 10%, it should be safe to think that more like 20-30% is what we really need to see for a real bottoming of home prices.

Housing Watch – Homeowners are slashing prices more drastically and more frequently, according to recently released data from ZipRealty. The average price reduction is now 7.1 percent of list price.

List prices dipped about $19,000 in August compared with July, across the 26 markets studied. On average, sellers made two price cuts during that time.

Seven cities saw price reductions on more than half of their inventory, with Jacksonville, Phoenix and Minneapolis on top with 55 percent, 54.4 percent and 52.4 percent, respectively.

“Earlier in the year we saw sellers being aggressive with their pricing, but not reducing as much,” says Leslie Tyler, vice president of marketing for ZipRealty. “What we are seeing now is that the trends are reversing.”

With the seeming desperation of home sellers, and the continued drop in mortgage rates, buyers are in a very good position. But the plunging rate at which buyers are applying for mortgages tells a different story, which might explain sellers’ attitudes.

Fewer homes are sold near the end of the year, and with the homebuyer tax credits now gone, people who have to move due to a job or a divorce will more quickly lower their asking price, she says. However, buyers are also being more patient. “Knowing prices are going down, buyers are more willing to wait for the right house.”

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