5/11/2011 1:36 PM ET|
Signs your home value could fall
The buy-versus-rent ratio. This ratio compares the cost of buying a home to renting a similar property for 12 months. Generally, the lower the ratio, the better the news for housing demand. Which makes sense: If buying is not much more expensive than renting, more people are likely to consider buying. When renting is a lot cheaper than buying, more people are likely to stay renters. A ratio of more than 20-1 could indicate prices have further to fall, Baker said. (This ratio doesn't work as a predictor in cities where rents are kept artificially low, through rent-control laws, for example.)
"If you're in a city that doesn't have rent-control protections and the ratio is over 20-1, that is not a good sign" for home prices stabilizing, Baker said.
Real-estate website Trulia calculates a rent-versus-buy ratio for 50 cities, while Zillow includes a rent estimate for many homes. You also can get a seat-of-the-pants number simply by asking a real-estate agent what a recently sold property would fetch in monthly rent. Multiply that figure by 12 and compare it to the sale price to figure the ratio.
Foreclosures and the shadow inventory. The number of other homes for sale has a big impact on your own home's value. A ton of for-sale signs means your property has a lot of competition, and competition tends to force down prices, everything else being equal. A lot of foreclosure activity in your market is even worse, because lenders typically slash prices of the houses they own to sell them quickly.
What constitutes "a lot" is a bit squishy, but you can be pretty sure that if more than half of the listings are foreclosures, that's a pretty bad sign. Both Trulia and Zillow can show you how many homes are for sale in your ZIP code, as well as how many are foreclosures.
That's not all you have to worry about, however. Economists also are concerned about the shadow inventory -- the homes in some state of delinquency that are likely to wind up in foreclosure but aren't on the market yet. Various foreclosure moratoriums, many prompted by the "robo-signing" scandals that revealed improperly processed foreclosures, have helped this number grow, and Humphries estimates it's now more than 5 million homes -- compared with the 3 million currently on the market. The greater the shadow inventory in your area, the longer it likely will be before home prices start to recover.
RealtyTrac may be able give you some idea of the size of this "pre-foreclosure" backlog, but in general, the more foreclosures on your market now, the more you'll see in the future and the further away a home price recovery is likely to be. (RealtyTrac's website includes "pre-foreclosure" listings in some markets when users search by ZIP code.)
Home price trends. What's happened recently often, though not always, indicates what will happen next. So keep an eye on sale trends in your ZIP code and in your specific neighborhood. Zillow, Trulia, RealtyTrac and other real-estate sites can help you monitor sales and prices.
Trulia's Ginger Wilcox recommends that armchair forecasters also look at price reductions -- how quickly home sellers move to cut their prices and how big a cut they make. Viewing those trends over time can help you determine if home prices are likely to continue to decline. When a growing percentage of home sellers reduce prices, values may have further to fall.
In December, for example, 26% of home sellers in Fresno, Calif., chopped their asking prices, compared with 12% a year earlier. Home prices in the area dropped 10% in March, compared with a year earlier.
All these data can give you some idea what might happen next for your market, but remember to take your own prognostications -- like those of the experts -- with a grain of salt.
"We have no national precedent for something like this," Humphries said. "This is new territory."
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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Personally I think prices are going to fall for at least 2 if not 3 more years. I'm already underwater and I don't care. What difference does it make? By the time I'm ready to sell (in extreme old age) the place will be worth more than I paid for it and then some. Right now, I have payments that are cheaper than rents in my area, a home I love and a light at the end of the tunnel. If you bought your house thinking it was an investment - Epic Fail, it you bought your house as a home : - ) . Just chill and enjoy your own home.
Plenty of blame to go around, but not all the foreclosees are victims. Most helped create their own problems. Banks didn't force anyone to get mortgage, just made it easy. All with Washington's blessing. And remember, when banks came begging Congress and the Prez could have said no.
Personally I believe we would have been better off if they had.
Well lets see; Hints that your home’s value will drop.
Do you live in a country with a failing economy that has a real unemployment rate above 22%? (hint is your flag red, white and blue)
Is your government spending money like a drunken teenager with a stolen credit card? (see hint above)
Is your country trying to rule the world at your expense? (same hint)
Has your government been lying to you about all things financial for over 60 years? (you guessed it)
Welcome to the 3rd world
One definitely has to factor in migrations of people due to where jobs are being created or being depleted. Some areas are already overbuilt in housing and populations declines will keep prices low. Other areas are on growth tracks and demand is high.
With all the foreclosures in my area...why pay over rated prices for
new or pre owned homes..?
Man this bad writing. Over 2/3 of the home sales in the Louisville area are reported high. How? Well to save developer and banks from being killed by lower property valuations the sellers agree to pay in cash after the close say $20,000 to $40,000 to buyers so that the higher price gets registered. Thus when you look at prices recently paid in your neighborhood or zip be aware these prices are inflated with the banks blessing.
I mean if the true sales prices were out there then the valuations of other developing properties have to be lowered requiring a further call on the developers. Those guys are already in the tank, so struggle along and let them maintain the properties as they do a better job than the banks at this.
Plus take a write down on those loans and suffer no bank bonuses why Washington needs to come along and allow a bailout. I mean what self righteous banker can live on just his $150,000 a year salary!!!!
Since Zillow is less than useless in rural areas, and it seems to be skewed to Phoenix, Las Vegas, CA, FL,etc.... I don't take much stock in anything they have to say..... My town of 50k people, might show 3 or 4 houses on zillow.... I consider them about as relevant as they do me....
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