Real Estate: Why home prices won’t bottom out
By John Wasik
(Reuters) – Watching the U.S. home market struggle to rebound is like listening to children in the back of a car. No, we’re not there yet.
The National Association of Realtors reported that ten real estate markets are “leading the nation toward a general recovery and stability of the housing sector,” but myriad problems are going to weigh down the housing market for months to come.
The lingering malaise in the economy has triggered a new wave of defaults and foreclosures. After five straight quarterly drops, foreclosures nationwide shot up 14 percent from the second to third quarter this year, according to data released by Realtytrac, the foreclosure information service (see link.reuters.com/kaw94s), in October.
While RealtyTrac doesn’t foresee that the latest foreclosure wave will equal the severity of the 2007-2010 pattern — in which three million borrowers lost their homes — it’s going to slam on the brakes where areas are getting hit the hardest.
In theory, it should be a good time to buy a home. In the worst-hit areas, properties have lost more than half their value.
Yet as the average 30-year mortgage rate has slipped below 4 percent, the combination of employment insecurity and unusually tight standards for lending are discouraging buyers en masse. Lenders are asking for extensive income verification and tax returns. One lender I contacted for refinancing even wanted me to get an accountant to certify that I wasn’t lying to the IRS.
Here are some of the biggest roadblocks: