Sellers Drop Prices By $27.4 billion
Foreclosures are impacting the marketplace and even the homes of the rich are going for less these days.
A new study by Trulia says that 23.6 percent of current homes on the market have had at least one price cut and that the reductions are valued at $27.4 billion. The company says “the average price-reduced home has seen a listing price reduction of 10.6 percent.”
The study finds that “of the top 50 cities in the U.S. based on population, 33 have seen 25 percent or more of home listings reduced in price, higher than the national average of 23.6 percent.”
U.S. cities that have seen at least 30 percent of homes reduced in price include:
Jacksonville, Florida — 36 percent
Tucson, Arizona — 32 percent
Boston, Massachusetts — 32 percent
Los Angeles, California — 32 percent
Columbus, Ohio — 31 percent
Dallas, Texas — 31 percent
Honolulu, Hawaii — 31 percent
Minneapolis, Minnesota — 31 percent
Austin, Texas — 30 percent
Washington, DC — 30 percent
Baltimore, Maryland — 30 percent
Las Vegas, Nevada — 30 percent
“Summer time is the peak season for buying and selling, and with some of the lowest prices in the last decade, we expect to it be a busy season,– said Pete Flint, Trulia co-founder and CEO. “Everyone wants to think they are getting the best deal available and price reductions are helping to spark a renewed interest in the U.S. real estate market.–
Foreclosures
The national average for price reductions on current home listings is 10.6 percent, says the company, but sellers in the areas hardest hit by foreclosures are slashing prices the most. Detroit home owners on average reduce their homes by 23 percent, while Las Vegas sellers reduce their homes by 16 percent and Miami sellers reduce their homes by 15 percent. Phoenix and Mesa are also experiencing deep price reductions with 13 percent slashed off the original listing price.
Luxury Market
Trulia also says that 24 percent of homes with a selling price greater than $2 million are seeing price reductions compared to 23.6 percent of homes on the market for the less than $2 million. While the percentage of homes seeing discounts are almost identical, discounts on luxury homes are significantly more with 14.3 percent being slashed off the original listing price compared to only 9.7 percent of homes under the $2 million dollar price tag.’, ‘Sellers Drop Prices By $27.4 billion’, 0, ”, ‘publish’, ‘open’, ‘open’, ”, ‘sellers-drop-prices-by-274-billion’, ”, ”, ’2009-07-14 07:59:06′, ’2009-07-14 11:59:06′, ”, 0, ‘http://www.ourbroker.com/?p=2994′, 0, ‘post’, ”, 0, ”, 1); (2983, 2, ’2009-06-09 08:00:57′, ’2009-06-09 12:00:57′, ‘it’s been quite a week on the mortgage front. According to Freddie Mac, as of last week rates for fixed-rate, 30-year mortgages went from 4.91 percent to 5.29 percent, both with 0.7 points.
That’s a big jump for a seven-day period, but let’s have some context here: Last year at this time the same loan was priced at 6.09 percent.
“Thirty-year fixed-rate mortgage rates caught up to the recent rise in long-term bond yields this week to reach a 25-week high,” said Frank Nothaft, Freddie Mac vice president and chief economist.
“Yet, there are signs that the housing market may be moderating. Housing affordability rose in April to the second highest reading since January 1971 when records began, according the National Association of Realtors? (NAR). As a result, pending existing home sales rose for the third consecutive month by 6.7 percent in April and represented the largest monthly increase since October 2001. Three of the four regions experienced increases, led by a 33 percent jump in the Northeast, the NAR reported.”
Affordability
Of course affordability is up. If the price of corn goes from $10 for five ears to $5 for five ears you can buy more corn — but do you really want to buy more?
As to sales, a huge percentage of sales are not everyday transactions between buyers and sellers, they are now transactions which involve the purchase of lender-owned properties, typically at discount.
Negative Interest Rates
Despite the big increase this week, the point remains that mortgage rates are ridiculously low. A year ago no one would have thought they could get 5 percent financing, now you can and such rates are characterized as “high” in some quarters.
You’re kidding. These are the rates of a lifetime. it’s possible that rates may again go into the 4 percent range and in theory it’s possible that they could go even lower — during the Great Depression U.S. securities were actually priced with negative interest levels. As Forbes magazine has reported, “T-bills got so popular that for brief periods between 1938 and 1941 they carried negative interest rates.” (See: “A Brief History of Stock Fads,” September 14, 1992)
In other words, you gave the government $100 and a year later maybe you got back $99. Why would people make such an investment? Because the banks were so iffy at the time that it was safer to lose a little with the government than with banks that paid interest — but might close.
We are now into the traditional home buying season. Whether you want to buy or refinance, now is a very good time to speak with lenders and brokers. Look into fixed-rate loans, forget about adjustables. If rates do go down again, and if they go down enough, then consider refinancing with a “no cost” closing — there’s a cost in the form of a rate somewhat above market level but not in the sense of a lot of cash (or maybe any cash) needed at closing.
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