First Ever Drop for Home Prices

For the first time on record, home prices are expected to show a decline:

The already rough real estate market may be about to get bumpier.
Economists predict a government report due out Thursday will show a national drop in the median price of single family homes since last year. If economists are right, it will be the first time that’s ever happened.
“Cumulatively, prices should fall somewhere between five and 10 percent nationwide,” said economist Mark Zandi.
The median price for a single-family home is currently $223,800. The median price is the number midway between the least expensive and most expensive houses sold in a given period.
Zandi says too much inventory, weak demand and tighter credit have been problems in some markets for two years.
“Well over half the country is now experiencing price declines and will experience further price declines through this time next year into 2009,” Zandi said. “That’s unprecedented.”
In Reno, home prices are down more than 6 percent from a year ago and are expected to drop close to 11 percent in the next year.
Minneapolis prices are down 2.6 percent from last year.
And in Hartford, home prices are down more than 5 percent from a year ago and are expected to fall further.
But the price slump hasn’t spread everywhere. Home prices are up in places like Charlotte and Austin.
With home prices dropping in so many areas, many families could lose a big financial cushion—their home equity.
“For those homeowners who bought in over the last couple of years, that piggybank is broke,” Zandi said. “There is no cash the to pull out because house prices have been declining and they have no equity in their home.”

Posted by Eddy Elfenbein on August 27th, 2007 at 4:02 pm

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