Home prices rise for 4th month in a row

Although this is great news, it does not give a complete picture. Most current sellers need to sell or the property being marketed is bank owned (REO). For those in a position to buy, this is a great opportunity and there certainly will be no shortage of inventory (Short Sales and REOs) during the coming year… Plus the value of standard sales is influenced by the distressed market.

A piece today in the WSJ “One in Four Borrowers Is Underwater“ states that nearly 10.7 million households , or about 23% of homeowners with mortgages had negative equity in the third quarter. It is estimated that more than 520,000 of these borrowers have received a notice of default.

On the bright side, the article goes on to say “Most U.S. homeowners still have some equity, and nearly 24 million owner-occupied homes don’t have any mortgage…” Some experts expect values to drop again in the coming year and it’s likely they will. We should definitely see values flat-line or drop over the next month and into Q-1 of 2010 due to the holidays and extension of tax credits to April 30th. My guidance is, if you’re buying a home and you plan to live there for 5 years or more, it’s hard to go wrong at 5% interest. If you don’t need to sell, don’t. Or consider leasing the property if you can. Speculators’ (flippers’) must understand that smart money is buying at a percentage of replacement cost and has the cash to carry if necessary. RD

PS – Also at WSJ.com, check out “Negative Equity by State” chart. California is actually slightly better off than Florida, Nevada and Arizona.

Home prices rise for 4th month in a row

WASHINGTON – The summer’s trend of rising home prices is flattening as the traditional home shopping season ends, two reports Tuesday showed.

The Standard & Poor’s/Case-Shiller home price index of 20 major cities rose 0.3 percent to 144.96 in September, the fourth monthly increase in a row. The seasonally adjusted index is now up more than 3 percent from its bottom in May, but still 30 percent below its peak in April 2006.

Another reading of home prices published by the Federal Housing Finance Agency held steady from August to September. Analysts expect prices to dip again this winter as foreclosures increase.

“As long as the unemployment rate stays elevated, you’re going to see pressure on the pace of foreclosures, which are going to find their way back onto the market, depressing prices,” said Dan Greenhaus, chief economic strategist with Miller Tabak & Co.

Home prices are a key ingredient to rebuilding the economy. Homeowners feel wealthier when their property appreciates in value and are more likely to spend money. Rising prices also help millions of homeowners who owe more to the bank than their homes are worth.

Currently, roughly one in four homeowners are in that situation, according to First American CoreLogic.

While prices nationally are likely to keep rising through November, “we are very worried about the potential for a huge wave of supply next year, both from private sellers and banks,” wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics. “Prices could easily reverse their recent gains.”

Home prices rose in 11 major cities with the strongest gains in San Francisco and Minneapolis, according to the Case Shiller report. Prices fell by the most in Las Vegas and Cleveland.

Compared with a year earlier, the 20-city index was down 9.4 percent, the smallest year over year decline since January 2008.

“With housing remaining an albatross around the economy’s neck, nothing would perk things up more than some increases in home prices,” wrote Joel Naroff, chief economist at Naroff Economic Advisors. “That seems to be happening.”

The price reports came a day after the National Association of Realtors said home resales surged by more than 10 percent in October as buyers took advantage of a special tax credit for first-time owners.

Source: Yahoo! News by ALAN ZIBEL, Associated Press Real Estate Writer

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