Home Prices Are on the Decline
In the second quarter of this year, home prices dropped by a record 4.8%. The drop caused home values to regress to 2005 levels. The numbers for the nation as a whole, however, are skewed by the disastrous foreclosure areas of a few key states. In 30 of the 50 states, home prices have actually risen modestly since second-quarter 2007. The home pricing report issued by the government tracked prices in 20 major cities. The prices of existing homes in these cities dropped by 15.8%, the biggest decline the index has ever recorded. In this post, we’ll talk about the decline and why and where it’s happening.
The Problem States
By now, everyone in the United States has heard journalists cry from the rooftops about the alleged “foreclosure crisis.” However, statistics indicate that this claim is overblown. In fact, 99% of American homes are not in foreclosure, and, as mentioned previously, homes in most areas are still gaining value, albeit modestly. The reason the national statistics really look so grim is because of a few severely foreclosure-plagued states. The states with the highest foreclosure rates are listed below.
- California
- Nevada
- Florida
- Arizona
The Buyers Come out of the Woodwork
As home prices continue to decline, buyers are snatching up cheap real estate in once-hot markets. Bargain hunters are coming out of the woodwork to capitalize on depressed home values. In Fort Meyers, FL, one home in every 64 is in foreclosure. As a result, one major real estate company in the area reports selling 10-15 condos and houses each week. Almost 75% of these properties are purchased with cash. Other foreclosure-prone areas have seen similar sales trends. Sacramento and Riverside, CA, Las Vegas, NV, and Orlando, FL have all had skyrocketing sales of late. Some enterprising buyers have realized that many properties are now selling at below what it cost to build them. This means that an investor can buy the property and rent it for a 7%-8% return. Compared to the abysmal Treasury rates of 3%, this is a red-hot investment.