Thursday, February 14, 2008

Home Prices Fall and Foreclosures Achieve New Heights

Investors only have to tune into the evening news to understand that foreclosures are reaching new dismal highs while home prices are quickly diving. A couple of new figures came out recently which reinforce how badly the housing market struggled in the last quarter of 2007.

The National Association of Realtors announced that home prices fell in 77 U.S. Metro areas in the fourth quarter. “The median sale price of a U.S. home dropped 5.8 percent to $206,200 in the last three months of 2007 from $219,000 in the same period of 2006. Prices fell in 77 of 150 metropolitan areas, the most since the group began tracking values in 1979. The decline was 10 percent or more in 16 metro areas, the Chicago-based realtors group said.” Hard to find any upside with this type of report, nor did NAR attempt to provide any. The situation facing the real estate market in 2008 is even more bleak.

The Rust and Sun Belt cities lead the U.S. in ‘07 foreclosures according the RealtyTrac. Of the 100 largest U.S. cities surveyed, 86 reported higher foreclosure rates. Naturally the areas in the country such as California and Florida that lead the country in the real estate boom have some of the highest rates in the bust. The other side of the coin is that cities facing overall economic problems like Detroit landed top spots. Many of the top cities have more than 4% of their homes in foreclosure.

Certainly housing situation is not going to improve much during the first six months of 2008. The slump is likely to cause further turmoil at new inflection points in the economy as the credit debacle flows over into the consumer and auto loan market. Many businesses as diverse as local banks to landscaping firms are likely to be vulnerable in 2008.