Foreclosure Further Brings Home Prices Down by 5.7 Percent

Time icon December 12th, 2008 by Autor Joseph Smith

IHS Global Insight announced that the housing value this third quarter of 2008 falter faster nationwide. Home prices depreciate at a 6.9 annual rate touching 241 of 330 metropolitan areas. If measured by market value there is a 3.8 percent undervaluation, but if measured by housing units, we are down by 5.7 percent. All these brought about by foreclosure.

The tightening seriously affects the Southeast and Southwest. Only three metro areas qualify for the title “over valuated” which is concentrated in the Pacific Northwest (Atlantic City, New Jersey; Bend, Oregon, and St. George Utah).

This continuous plunge reflects our financial conditions. One is the increasing and more expensive home loan payments that lead to foreclosure and even bankruptcy. There are efforts to resolve these foreclosure problems like the Federal Reserve policy to buy loan-backed securities, but will not have significant effects until next year.

In some central California, home prices fell by 10 percent but in Stockton, Merced and Modesto home prices dropped by almost half of the 2005 value. Florida, Nevada and California used to be the most over valued areas but they dipped by 30 percent. The same scenario is seen in Michigan, Ohio, Charlotte to Atlanta and New England.

Over valuation generally centers in the Pacific Northwest while the Southern metros are mostly undervalued. This same pattern goes with foreclosure.

The poor economy and the troubled consumers continue to weaken the housing market. It may appear that home sales are increasing, but it is only brought about by re-sales of foreclosure. Many seem to prefer cheaper foreclosure homes.

IHS Global Insight and National City Corporation joined forces to have the House Prices in America Study. 330 states were examined to determine how much houses should cost. This is comprised of 78 percent of old housing units and 86 percent of close real estate value. They found out that markets that reach more than 35 percent of valuation premiums are at greater risk for price adjustments.

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