U.S. home prices fall 18% in October compared to 2007

December 30, 2008 by · Leave a Comment
Filed under: Real Estate News 

I like the line “People are skeptical about the underlying value of properties, which is making them cautious and fearful,” Peter Morici said.  This underlines the fact that we had a huge overvaluation on real estate assets and until prices come down to a level that is near the traditional 1.5 times your annual income, we will see prices fall to that level.  

I still don’t understand why people don’t seem to know that a home is a liability until you pay it off and your living rent-free.   What should happen is once the prices come down to a reasonable level, the government should then help provide real fixed rate loans to soak up the excess homes that people can afford.  That helps build communities and that is beneficial to us all.

News:

Prices of U.S. single-family homes plunged a record 18.0 percent in October from a year earlier, Standard & Poor’s said on Tuesday, with the drop in prices accelerating as the broader economy deteriorates.

Prices fell at the fastest monthly pace since March, an indication that government steps, such as encouraging lenders to modify delinquent loans, have not cushioned the housing bust, which continues to weigh on the economy.

“So far all of the government efforts to help the housing market have not worked and the situation will probably worsen until there is an improvement in the jobs market,” said Peter Morici, economist and professor of business at the University of Maryland in College Park, Maryland.

“The housing market should continue to tumble for a while and there is no reason to believe that home prices will stop falling unless more is more done to stem the foreclosures and boost the jobs market,” he said.

The Standard and Poor’s S&P/Case-Shiller Home Price Index for 20 metropolitan areas fell 2.2 percent in October from September, accelerating for the fourth straight month.

The price drops, both on a year-over-year and month-over-month basis, were more severe than analysts had expected, based on a Reuters survey of economists.

Several factors such as employment have worsened since October and Morici expects prices to continue falling.

“People are skeptical about the underlying value of properties, which is making them cautious and fearful,” he said.

Source: Reuters

 

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