Home Prices Continue Decline

Last week, Standard & Poor's released their much anticipated Case-Shiller composite index, which compiles home prices in 20 of the largest metropolitan areas in the country. The report showed a decline of 1.0 percent in October from September on a seasonally adjusted basis, a much steeper drop than the 0.6 percent fall expected by economists. Although this is bad news for homeowners, the drop does present a buying opportunity for many investors who are looking to snatch up distressed properties.

"Demand for these properties will always remain strong," states Andy Weiser of Coldwell Banker Residential Real Estate. "For primary users, the choice of available property is phenomenal. For investors, there has rarely been a better time to bulk up their portfolios."

The housing market has been struggling since home buyer tax credits expired earlier this year. To take advantage of the tax credits, buyers had to sign purchase contracts by April 30. "In areas of the U.S., it was a very strong deciding factor in the strong uptick in the market. Once the tax credit expired, activity leveled quickly." In the Greater Fort Lauderdale metro area the impact was not as great, Weiser tells SFGN. "At the end of the day, pricing is the key issue on buyer's minds."

Another disturbing fact in the report shows home prices in the Miami metro area continue to decline. Miami was one of six markets to hit their lowest levels since home prices began dropping in 2006 and 2007.

"The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October's report. Home prices across the country continue to fall," said David M. Blitzer, chairman of Standard & Poor's Index Committee, in a news release. The leading measure of U.S. home prices reported year-to-year increased in only four cities - Los Angeles, San Diego, San Francisco and Washington D.C.

"On a year-over-year basis, sales are down more than 25 percent and the months' supply of unsold homes is about 50 percent above where it was during the same months of last year," Blitzer said. Those deep discounts are what helped sell homes in Miami, according to a new report from CondoVultures.com.

Weiser is quick to offer a reaction to the double-dip projection: "The economists may have called for it, but the people actually buying homes don't seem to be listening to them. In the end, it's the buyers and sellers who actually determine where prices will go, not economists or Realtors."

The real estate market has gone through many cycles over the past 50 years, but Weiser mentions what makes the current cycle different from those of the past is there was a larger amount of investor speculating based on loosened restrictions on borrowing. "Investors believed their own hype," he added

To further add fuel to the housing fire, Thomson Reuters reports U.S. home foreclosures jumped in the third quarter and banks' efforts to keep borrowers in their homes dropped as the housing market continues to struggle. Regulators said one reason for the increase in foreclosures is that banks have "exhausted" options for keeping many delinquent borrowers in their homes through programs such as loan modifications.

Newly initiated foreclosures increased to 382,000 in the third quarter, a 31.2 percent jump over the previous quarter and a 3.7 percent rise from a year ago, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in their quarterly mortgage report. The number of foreclosures in process increased to 1.2 million, a 4.5 percent increase from the second quarter and a 10.1 percent increase from a year ago.

Weiser considers this a buying opportunity. "Considering the number of primary home buyers and investors who we are writing contracts for - please note I didn't say 'offers' - I would have to say this is a very good time to buy." He also tells us lending has loosened up a bit and there is buying potential in every market, although to discover the best opportunities, a person must be "totally immersed" in that particular market or work with a Realtor who is.

For home buyers, Weiser recommends looking into FHA mortgage programs, where rates could be as low as 3.5 percent. "Even better than that, as long as a property qualifies, there is a specific FHA Rehab loan. This means that if the property you are considering qualifies for an FHA loan but needs substantial renovation, FHA will appraise the property as if the work has already been done and loan you the rehab costs."

However, it is easier to purchase a single-family home over a condo or multi-family unit. "There is still mortgage money available with a 5% down payment for a non attached, single family primary residence. Of course there will be PMI on this loan. For attached properties, the average minimum is 20% for a primary residence. Investment property requires a higher down payment."

For more information, please visit AndyWeiser.com.