Housing prices nationwide likely will drop another 9.1% on average before leveling off, according to the latest quarterly market update by Fitch Ratings. The agency’s Sustainable Home Price (SHP) model predicts that housing prices still have a ways to go before reaching a level that can be supported by market fundamentals. Several parts of the country – including Michigan, Arizona, and Nevada – can anticipate greater volatility with home prices, leading to a steeper drop before they stabilize. In other areas, the decline may be more gradual, as foreclosures and distressed liquidations are delayed due to the settlement between the nation’s five major mortgage lenders and 49 state attorneys general.
In Texas, the outlook is more positive, with housing prices expected to remain flat – a sign of the state’s stronger economic outlook. Even so, flat prices are not as ideal as a continual increase, like we had from the 1970s until 2008. Homeownership is a fundamental component of the American Dream, and until housing prices begin an upward ascent again, that dream remains far off for millions of people.
In addition, thousands of Texas homeowners still face the prospect of foreclosure or a short sale because they are upside-down in their mortgage. According to a recent report by Core Logic, nearly 23% of homes nationwide are in negative equity, meaning the value of the house is worth less than the mortgage. Counting the homeowners who have less than 5% equity in their home, the total rises to 27.8% of homes nationwide, the report states.
Don’t hold your breath waiting for your house price to increase to make up for the losses that have been incurred in the past three years. Sadly, we believe that it may take until the year 2040 for the nationwide housing market to regain its full strength and for prices to turn upward again. The combination of significantly overinflated home values and the losses that banks incurred as a result of writing subprime loans for unqualified borrows not only caused the bottom to fall out of the housing market in 2008, but also the large scale correction that continues today and likely will endure for years to come.
If you are underwater in your mortgage and are looking to cut your losses by negotiating a short sale on your home, please give us a call. Our experienced short sale agents are happy to answer any questions and assist you with the process.