Lower Home Price Forecasts Due to Foreclosures

November 12, 2008

New York University professor Nouriel Roubini, the economist who correctly predicted the housing slump and the credit crisis, has predicted another 20-percent decrease in home prices in 2009. Patrick Newport of forecasting company Global Insight predicted a fall of 15-percent, slightly lower than Roubini’s figure.

As shown in the S&P and Case-Shiller housing price index, home prices have been down 20-percent across the U.S. since the peak posted in July 2006 as foreclosure homes continue to accumulate.

The other major reason cited for the continued decline in housing prices is higher mortgage rates, as compared to rates charged by banks in the first months of 2008.

Economist Lawrence Yun, head of a national realtors’ association, expects home prices to increase by about 2.8 percent in 2009. He opines that a wave of home buyers wanting to buy foreclosed homes at bargain prices would push prices higher towards the end of 2009.

Here are some tips for residential real estate professionals on how to optimize trends in the last months of 2008:

  • Sellers need to show that their properties are in move-in conditions and that they have unique features.
  • Sellers are advised to reduce their prices by as much as five percent below average prices in the area, as seen on zillow.com, especially if they are selling foreclosure properties or repo homes.
  • Buyers should look for properties which have been offered for sale for several months. Most sellers are open to lower pricing deals if their properties are hard to sell.
  • Buyer’s agent Barry Miller has suggested making one’s first offer about 13 percent below the seller’s quoted price. Sellers are more open to hard bargains because they know that there are lots of low-priced foreclosure properties on the market.
  • Mortgage rates can also be reduced by home lenders if a buyer’s credit score is in the range of 780 to 820, according to John Ulzheimer of credit.com.

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