January 17, 2011
Market Predictions For Home Prices
With the housing market having taken a big hit since the sub-prime mortgage crisis, all eyes are looking to the US housing market for signs of recovery. It seems, however, that house prices in The US have not yet bottomed out meaning that we have some way to go still before we see a rise.
One contributing factor to the low costs is high unemployment. With high unemployment, majority of the individuals simply does not have the finances to pay money and purchase houses, something that would always have a negative impact on any market. With house prices already low, spending and investment is needed in order to push prices back up again, but till the money is available to spend and invest, that will not be happening.
One more factor that is keeping house prices low is that there is a high inventory of vacant properties, and new properties are still coming onto the market. If there are many properties available for sale, then the high supply would outstrip demand causing a further dip. In market environments like the one we are in at present, the buyer has greater influence and buyers generally wish to pick up a property at the best possible price for them. When a home owner is looking to sell their home then having lesser options means that they’re more likely to have to settle for a lower price. With more prospective buyers, they will have more bargaining power and can usually hold out for a better price.
Before the market is to rise, it would first have to find its bottom and stabilize. This will encourage potential buyers who are seeking to enter the market at the best possible moment so as to augment their future profits. With the housing market expected to continue to drop over the next few months or so, it’s unlikely that buyers will begin to enter the market any time this year. With some analysts predicting that home prices might drop by another 10 to 15 percent, we may see a substantial amount of downturn before we would be able to expect to see things pick up again. Additional estimates claim that after the markets reach their bottom, it may take another 10 years for them to recover meaning that it could be a decade before we saw the type of housing market that we were seeing before the crisis.
Incentives like the first time buyer tax credit have turned out not to be as successful as was hoped. Although sales figures increased during the period, it was found that instead of actually increasing the number of home sales, it merely encouraged potential consumers to bring forward their purchase from later in the year.
With more foreclosures projected which would further add to the list of vacant buildings, a sluggish economy and buyers still biding their time before purchasing, it could be a while until we see house prices increasing once more.
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