Why are Home Prices Dropping in Today's Market?
A recent study performed by professor Karl Case of Wellesley College (contributing author of the Case-Schiller Home Price Indices - a quarterly nominal housing price report) revealed the rate of appreciation for home values over the five-year increments stretching back to 1980. The research revealed that home values appreciated at an average rate of 26.5 percent of the 20 year period from 1980 through 2000. At this point the housing market in the United States hit a boom and home value soared. Between 2000 and 2006 the study shows an average appreciation of 89 percent! An increase this rapid and inconsistent causes home values to be unrealistic. When the boom is over it is typical for home values to level themselves out. In other words, the housing market is not declining. Instead it in the process of stabilizing itself, which, in turn, will create a more stable market in the days to come.
Other major factors contributing to the housing crunch are the tightening of conventional lending and a heightened home inventory.
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That is complete bologna. The market is declining, prices are dropping. Mr. Case suggest that substantial more price reductions are in the works all over the country over next few years.
"Home prices nationally continue to fall, and are no longer confined to just the ‘sand’ states,” said Mark Fleming, chief economist for First American CoreLogic in the company’s report. “... The economic downturn and high levels of distressed housing inventory means that the likelihood of a price recovery will not begin until 2010.” http://www.fwbusinesspress.com/display.php?id=9820