April 22, 2010
Though some industry experts don't rule out a double dip housing recession, sales figures continue to suggest the market has regained a measure of stability.
The latest signs are contained in a report from a real estate website, Trulia.com, which follows the prices of homes currently on the market. It finds that 20 percent of home sellers have slashed the price of their homes in April, compared with 27 percent who did so in the same period a year ago.
"With such a dramatic drop in home price reductions over the past year, we're beginning to see early signs of stabilization in the housing market on a national level, as well as locally in certain markets," said Pete Flint, Trulia co-founder and CEO. "As the federal stimulus comes to an end this month, coupled with expected increases in interest rates and foreclosures, the next few months will be very telling for whether the US housing market can be self-sustaining over the longer-term."
In April 2009, Trulia first started tracking price reductions, both nationally and for the 15 major U.S. cities. Of the original 15 cities, those hit earliest and hardest have experienced huge decreases in price reductions compared with the previous year, including Las Vegas (54 percent), San Diego (52 percent) and San Francisco (45 percent). Seattle was the only original city to see a significant increase in price reduction levels with a 15 percent spike versus the previous year.
How low can you go?
It may be that prices aren't still dropping in some of these markets, however, because of the staggering drop already experienced. In Las Vegas, for example, homes that sold in the low to mid $200,000 range at the top of the market are routinely listed for $70,000 or less - foreclosures and non-foreclosures alike.
In addition to seeing fewer homes reduced in price, the current report shows several cities have seen significant decreases in the percentage amount slashed from the original listing price compared with the previous year. New York and San Francisco both saw discounts on home prices drop by more than 30 percent compared with April 2009.
On the other hand, several cities actually experienced increases in the average price reduction. Houston, Denver, Seattle and Phoenix all saw double-digit percentage increases versus April 2009.
Despite the news, few are calling this a real estate bottom, as two circumstances cloud the future. First, the homebuyer tax credit expires at the end of this month, making it less certain the same number of buyers will be in play. The end of the tax credit removes from $6,500 to $8,000 from the buyer's side of the settlement sheet, meaning they can afford less house.
Second, foreclosures are not ending, but actually increasing. The government's loan modification program, begun a year ago, has yielded less than stellar results and now many lenders have ended "trial" modifications and begun foreclosure proceedings.
