The past few years have been terrible for many home sellers. Home prices have fallen on average 30 percent. In my neighborhood home prices have fallen by over 50 percent.
Foreclosures hit an all time high in 2010. Home sellers will still have it tough in 2011. More foreclosures are expected to come.
With large numbers of foreclosures, home values won’t be able to rise. Many sellers will find the price of their mortgage is higher than what they could sell their home for. Many sellers won’t be able to sell for what they owe the bank, and this increases foreclosures.
Foreclosures also push down home values in the neighborhood. This also creates problems for real estate buyers. This means homes won’t appraise high enough for buyers to get loans on them.
With unemployment levels remaining high, those without jobs can’t afford mortgage payments. Without a job, they can’t buy a home. This means fewer buyers for more homes, again driving real estate prices down to entice buyers.
Many of those with jobs have had to take pay cuts over the past few years as their employers struggle in a difficult economy. One research suggests that 55% of Americans are earning less money now than they were. Another poll found that one third of us have a family member who has lost a job. Reduced income means less money for buying a home.
Those Americans who used temporary loan-modification programs or completed a short-sale, foreclosure, or bankruptcy now have trashed credit ratings. This means they won’t be able to get another loan for a home for many years. This also limits the number of home buyers available.
What about the future of the real estate market? The best guess is that we’ll continue to have more of the same. This is likely to continue until the economy shows a better recovery.