Housing Market Should Continue Slumping Through 2007

(The housing market will rebound in 2007.)

The housing market will continue to fall in 2007. If you are remotely interested in the real estate industry, these two statements have been permanently imbedded in the back of your mind for the past six months. You can’t get them out if you try, believe me.

Now the key question is; which statement is correct? Every article or media coverage of the real estate or more accurately, the housing market, comes to a conclusion of what the future holds for home prices and sales. The reasons are usually tied to something loosely related such as consumer confidence or the job market.

But the article, “Three reasons why US house prices have further to fall,” which is posted on the November 7, 2006 edition of moneyweek.com, states why the housing prices will continue to decline through concrete explanations.

“This morning, the Commerce Department reported that the median price of a new home sold last month [September 2006] slumped by 9.7% from a year ago to $217,100. This came on the back of a 2.5% price decline in existing home sales last month [September 2006], and was the biggest single-month drop since December 1970.”Amazing, considering the rapid pace of inflated prices over the last few years, $217,100 marks the lowest median price for a new home since September 2004.

But price declines in 2007 may make 2006 look like a good year, according to the article.The first supporting reason for the continued declined is that there is an oversupply of properties available in the market. The demand just isn’t there.

The second piece of evidence is that builders still have not finished projects that were started six months ago, before the buyer’s market was established.

“Third, sellers are still wishing and hoping they can sell their houses to the ‘right’ buyer for the ‘right’ price next week. Just like the NASDAQ collapse earlier this decade, homeowners are prone to overly optimistic projected outcomes in their personal situation.”

It has been predicted that by this time (early November) next year, prices in former booming hotspots like Nevada (Las Vegas), California, Florida and Arizona may not decline 5 percent like economists believed a couple months ago, but rather 10 percent to 15 percent.

“Overall, we may not see a full-blown crash in housing prices, but a fall of 20% to 40% from the highs in many areas will be the norm, not the exception.”

Despite numerous “doom and gloom” reports in major newspapers, the majority of sellers are still in denial. It is difficult to admit what has happened to the real estate market if you attempted to invest in properties at the end of 2005. Everything changed overnight and now sellers are begging just to rid themselves of the expensive property eating away at their savings.

“But when homeowners finally adjust to the prices that reflect the marketplace reality, bolt the door - because prices will fall like dominos.”

The best advice for sellers stuck with an extra property is to take the first reasonable offer and consider you lucky.If you absolutely need to sell a property or will have to if the market worsens, sell as soon as possible. The market is going to cause home prices to fall much lower than they already have over the next year,

If you want to but do not have to sell, be patient; prices should be back to comparison and rising within two years.

Back to Articles