Home Prices Continue to Fall. Are Foreclosures to Blame?
Home values rise and fall based on many factors. Recently the economy, the volume of homes on the market and the rash of foreclosures have contributed to the decline in home values. With the subprime lending that ran ramped in the peak of the home sales in 2005 and 2006, home buyers were able to buy more house than they could realistically afford. This has lead to the continued increase in foreclosures.
Florida had one of the greatest price increases in the housing boom, and everyone jumped on the bandwagon. What everyone didn’t realize is what goes up must eventually some down…did you hear the thud? This rapid decrease in home values, which happened very suddenly, almost over night, has caused a lot of the foreclosures. Homes purchased during the boom are no longer worth what a homeowner paid for it. Homeowners are in financial distress, and because of the decline in value, they have no equity in their home, and they are simply walking away.
The foreclosed homes are sitting abandoned, and they do effect the values of other homes in the neighborhood. This is not a good thing for the homeowner that wants to sell and is not in a distressed situation, but thankfully, we are seeing buyers come back out and scoop up some of these deals. If that continues, and we will reduce the inventory, and it will help the values stabilize.
Investors and home buyers are taking advantage of today’s market, and I don’t blame them. Fixed 30 year mortgages can be found easily below 5% and 15 year mortgages have sunk below 4.5% according to the Mortgage Bankers Association. The spurt in activity over the past 4 - 6 weeks is a sign that buyers think that we are at or very near the bottom, and they want to take advantage of these good deals before they go away. Sales jumped 5 percent in February compared to the same time last month.