(NPR) 4 Reasons Home Prices Are Likely To Keep Falling

1. There’s still a glut of houses on the market.

At the current pace, it would take about seven months to sell all of the newly built houses on the market, and eight months to sell all of the existing homes on the market. In an ordinary market, it would take about six months to sell all of the homes on the market. This excess supply tends to push prices down.

2. Distressed sales account for a huge chunk of all home sales.

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Posted in * Economics, Politics, Economy, Housing/Real Estate Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--

2 comments on “(NPR) 4 Reasons Home Prices Are Likely To Keep Falling

  1. sophy0075 says:

    There is a fifth reason why housing prices will keep falling, and I have been predicting this for the last ten years (ask my friends and family 😉 ). As baby boomers age, they will want to sell their McMansions to help fund their retirement (their meagre IRAs, 401ks, and 403bs certainly won’t). This will add to the glut of homes on the market. The Gen X putative homebuyers will be in a buyer’s market. Furthermore, because these square-foot hogs are too energy-costly, not only to heat/cool but possibly also because of their suburban distance from business locations, their prices will have to drop further to be competitive with smaller, older homes (dare I say apartments and condos?) closer into city centers.

    Ah, and this brings me to a sixth possible reason for a housing price drop. If Congress/Pres decide to make a portion of mortgage interest non-deductible, or non-deductible for wage-earners over a certain bracket, that will be a further disincentive for housing purchases.

  2. Bart Hall (Kansas, USA) says:

    Goodness, me! Are these people brain dead? There’s nothing at all complicated or esoteric about this dynamic, yet the closest NPR can get is to talk of a housing “glut.” WAYSA ?

    Home purchases peak at about age 48. This is public information from the Bureau of Labor Statistics. Baby Boom births peaked in 1957-’58. This is public information from the Census. Is nobody at NPR capable of even basic arithmetic? A birth peak in 1957-’58 shoved forward 48 years to peak home buying age arrives in 2005-’06. Home prices peaked in June 2006.

    Post-WW2 births reached their nadir in 1973-’77, so let’s add 48 years and all sing along. And-a one, and-a two, and-a three …

    [i]Let’s all sing the house market jive.
    Prices will fall ’til twenty-twenty five.
    Or maybe if we’re having some fun,
    Things’ll turn around starting twenty-twenty-one.”[/i]

    By the way, the previous housing market bubble peaked in about 1890, both here and in Europe, and adjusted for inflation prices did not regain that peak until about 1982.

    If you want to sell your house, sell it yesterday and take whatever you can get for it. Do not accept “contingency” offers dependent upon either financing or sale of another home. Such offers present about a 5-to-1 risk your house will be off the market for two months and the sale will fall through anyway.

    Or you can wait until 2096 in hopes of getting your price.