The number of price-reduced homes on the market in December 2010 fell by 7.7 percent from the previous month, according to a survey of 26 major U.S. markets conducted by the national real estate brokerage ZipRealty.
Despite the month-to-month decline, the company says the number of homes with a reduced asking price remained high compared to a year earlier, rising 23.4 percent from December 2009.
ZipRealty’s report shows that in nine of the 26 markets included in its study, more than half of the homes for sale in December 2010 included at least one price reduction.
The report also found that in the markets surveyed, the median list price in December was down 3.9 percent at
$225,434, compared to November when the median list price was over $9,000 higher at $234,484.
According to ZipRealty’s 26-market analysis, the percentage of total housing inventory that has experienced at least one price reduction dropped for the first time in months, decreasing to 47.2 percent in December. That’s down from 48.4 percent in November and 48.3 percent in October of 2010.
December is traditionally a slow month for home sales, and this could be a contributing factor to the decline over the previous two months in inventory as well as the drop in median list price.
Steps to limit price declines may have helped, but economic growth is now critical.
Home prices in twenty major metropolitan markets dropped 1.3% from September to October, the third straight month-over-month drop, according to the December S&P/Case-Shiller home-price index released in late December. The decline erases a significant share of the modest gain in home values since prices hit their bottom early in 2009, and raises the risk of a double dip in home values over the next year or two.
Economists have been mixed in their views of the likelihood of a double dip in housing values. Peter D. Schiff offered one of the most pessimistic views in his December 30th Wall Street Journal opinion piece “Home Prices Are Still Too High.” He noted that the average annual home appreciation over the twentieth century was 3.35%. If you apply that historic appreciation rate to average 1998 home values (a previous peak), today’s homes are still overvalued by 20.3%. Schiff argues that once government programs to prop up home values are removed, home values will actually drop more than that, perhaps by another 24 – 28% because of unfavorable economic factors, including current unemployment and national debt levels and depleted personal savings.
There are other reasons that support Mr. Schiff’s pessimism. Right now there’s still simply more housing inventory than people who can afford them. Many potential first time buyers already made their move when the tax credit was available. A good share of the remainder probably still remains cautious and the recent declines in home prices will not bolster their confidence. Not everyone is so pessimistic. At the other end of the economic projections are real estate sector trade associations, who habitually issue optimistic projections, perhaps to encourage consumers to buy now, before the price goes up.
The American Homeowners Foundation thinks that we are at or fairly near the bottom of housing prices. Even though prices could soften a little more during 2011, the prospects for improvement in the housing market by the end of the year, and sustained growth thereafter, are better than 50-50.
Mr. Schiff’s views are overly pessimistic for several reasons. Applying a long term growth pattern to a uniform product is realistic, but single family homes are far different today than they were in 1900. The average new home built today is about twice the size of a new home built in 1950, and as the older homes are replaced there is an inherent increase in home values that his analysis does not take into account. If you compare the share of disposable income spent on food in the U.S. today compared to 1900, a logical conclusion might be that most Americans must be starving. A look at the size of the average consumer in a local mall on any weekend would absolutely dispel that notion.
While Mr. Schiff is correct that employment will be a huge factor in housing demand, employment increases always lag behind improvements in other U.S. economic indicators. We are beginning to see healthy improvements in many of those. Retail sales improved substantially over the recent holiday season, and have returned to levels just prior to the recent recession. U.S. manufacturing continues to expand and our exports are back to where they were just before the financial meltdown. Recent surveys show that optimism levels of business heads have also returned to near pre-recession levels. The payroll-tax cut for most workers in the tax package passed last month will also fuel employment increases.
The government programs to help prop up home values were realistically only a bridge to break the free fall in home values until a recovery could take hold. The foreclosure rate in many areas is beginning to decline, most likely because a large share of those homeowners who were or will be in trouble have already worked their way through the system. Some of them are already beginning to work off their excess housing inventory. As those temporary government price support programs begin to expire, there is a good chance that increased housing demand will kick in and prevent housing values from dropping further. If that ends up being the outcome, they will have accomplished as much as could be expected. As new jobs are created that will accelerate. The aforementioned economic indicators suggest than a recovery is in the offing.
It remains true that significant increases in housing prices in most markets will not take place until job growth picks up substantially. Nevertheless, recent indicators suggest that we will begin to see healthy job growth in the coming months, and some predictions are for a healthier housing market by the end of 2011.
You probably already know how important it is to have a good credit score. A high score can help you qualify for loans with the lowest interest rates, nab auto insurance at the lowest premiums, and even beat out your competitors for that dream job.
However, having a good credit score is even more important today. That’s because homes across the country are at their most affordable levels in decades, but you won’t be able to qualify for a mortgage loan for one of these bargain-priced residences if you don’t learn how to keep good credit.
The most recent Housing Opportunity Index, a measure of the affordability of homes across the country, reported that 72.1 percent of residences in the third quarter of this year were affordable to households earning the national median income.
This means that households earning $64,400 a year could afford the vast majority of U.S. homes.
This is a big change from the days of the housing boom, a boom that came to a slow end in late 2006. Back then, economists were worried that rising home values would price all but the wealthiest members of society out of the opportunity of owning a home.
These concerns have lessened as housing values continue to fall. This comes with its own negatives, of course; falling home values have made it more difficult for homeowners to sell their homes without losing a sizable chunk of the money they initially invested in their residences.
You know how important a top credit score is; you just need to know how to get a good credit score. Fortunately, this is simple. You just need to pay all your bills on time every month, and you need to cut down on your credit card debt. Finally, close any credit card accounts you don’t absolutely need.
These three steps will send your credit scores on a steady upward trend. Don’t expect to nab a top score overnight, though. Repairing bad credit takes time, months at the least. You might have to wait to buy a home for a year or more depending upon how low your credit scores are.
Common wisdom once considered 700 a good credit score. That’s changed too. Today, conventional mortgage lenders are more frequently reserving their best interest rates for borrowers with FICO credit scores of 750 or higher. If you want to nab these top rates, aim for such a score. Getting a good credit score takes patience and commitment. However, the rewards make the hard work worth it.