Housing prices continue to move downward in major metropolitan areas, according to data from the latest S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices. The most recent drop represents the sixth straight month of declining home values in most major U.S. cities. The Dallas market, however, is faring much better than other areas, including Atlanta, which had a 17.3% decline in annual returns – the fifth consecutive month of double-digit negative returns for the city. In contrast, home prices were unchanged in Dallas from January to February 2012.
On the national scale, data through February 2012 showed annual declines of 3.6% for the 10-City Composite and 3.5% for the 20-City Composite. Although the numbers represented an improvement over the annual rates of -4.1% and -3.9% posted for the month of January, the continued declines clearly indicate that we are still a long way from a healthy housing market.
On a positive note, home prices in Dallas likely have already hit bottom, according to the Zillow Home Value Forecast, with nowhere to go but up from here.
“Buyers also should take into account the possibility that rising mortgage rates could offset any further home value declines that may occur,” noted Zillow Chief Economist Dr. Stan Humphries in an interview with DS News magazine. Even so, be prepared for North Texas housing prices to remain flat for several years, and possibly drop off once more. In our experience with short sales, about 50% of the buyers are investors versus traditional homeowners. Investors demand discounted prices, which drives overall home prices down.
In addition, the wave of younger buyers will reduce the demand for home purchases and continue to put downward pressure on home prices. Recent graduates are making less money out of college and carrying a very heavy debt load – mainly student loans. These factors will prevent them from making significant purchases for many years, including housing purchases. Removing these buyers from the market will keep prices flat or declining for years to come.
Even among older adults, a large percentage of home buyers are not yet willing or able to purchase a house. Various factors are keeping these would-be homeowners from buying a property, such as tighter lending practices, a lack of sufficient income, and a lack of faith by the general populace that investing in a house is a smart move.
Potential homeowners often ask me whether purchasing a house right now is a good idea and a good value. The answer is Yes and No. Housing prices in Dallas are excellent. If you are planning on buying a house to live in it, this is a great time to buy. I say buy now, fall in love with your house, and plan on living in the house for many years. If you are buying a house with the expectation that the value of the house will increase as it did in the past, don’t bank on it. Demand for housing will not be as intensive as it was from 1970 through 2008, and the low demand will keep housing prices from rising.
Low home values, high mortgage payments, and a flagging economy have left many homeowners struggling to stay current on their mortgage loan. If you are underwater in your home and facing the possibility of foreclosure, please call our office at 972-342-0011 to discuss the option of a short sale. We can negotiate with the bank on your behalf and get you out from under too much mortgage debt.