Where do prices go from here? Will prices decline, remain stable or increase in the fall and winter months?
There are many factors which are likely to contribute to driving down prices in most metropolitan areas during the fall and winter months. Here is a list:
- Higher Mortgage Rates
- Possible Expiration of 8,000 Home Buyer Tax Credit
- Continued Job Losses
- High Foreclosures
- Seasonal Price Declines
Mortgage rates for buyers with good credit became very low over the summer months. Mortgage Rates Daily has a terrific graph to illustrate this point. Mortgage rates are likely to rise over the coming months towards 5.5% for a 30 year fixed.
Possible Expiration of 8,000 Home Buyer Tax Credit
The Federal Government's 8,000 home buyer tax is set to expire on November 1st 2009. It may be extended, it may not be. If it is not then this will certainly put downward pressure on housing prices.
Job Losses will continue
With the millions of job losses over the past year and the growing number of people falling off of unemployment rolls the downward pressure on housing will increase. Don't expect job gains until at least spring 2010.
Foreclosures continue to remain at very high levels. Hundreds of thousands of new foreclosure notices arrive each month. Banks have a large backlog of foreclosed houses and condos waiting to be sold, "RealtyTrac, in its August 2009 U.S. Foreclosure Market Report, disclosed that foreclosure filings were reported on 358,471 U.S. properties during the month, representing a decrease of less than 1% from July, but still an increase of nearly 18% from August 2008.The report shows that one in every 357 U.S. housing units received a foreclosure filing in the month." RTT News. These amount of foreclosures per month will continue at a very high rate as we head into the colder months.
Seasonal Price Declines
Housing prices have a seasonal component which is that prices tend to do 'better' in the spring and summer months than the fall and winter months. This has been true during regular market periods as well as during the housing bubble and bust years. Many housing price indices (Realtor's and Case Shiller) are seasonally adjusted because of the strong seasonal component.Summary
Due to a variety of factors prices in most major metropolitan areas are likely to fall during the fall and winter months. Don't expect spring 2009 to be the bottom.