Maybe they will come true, maybe they wont – but here is one from a fairly credible source that says property values still have a ways – a long ways – to fall.
According to the guys at Lender Implode, the 10 major cities in the Standard & Poor’s/Case-Shiller home price index have risen 5% from their April low, but the index is still predicting a massive 45% fall from today’s values.
One insightful comment came from “John L” who appears to live right here in Phoenix:
The predictions pointed out in the article can be confirm by an analysis of the change from lax credit underwriting for home buyers starting in late 90’s, which created an undue stimulus on the demand for real estate, back to the traditional credit underwriting standards for home buyers.
Incomes have not risen for years. The amount of the mortgage a home purchaser is qualifies for is determined by their “documented” income. Home prices will have to decline to a level to match the buyers purchasing ability.
The more curious fact is the continued government intervention in the market for the benefit of the FED, FNMA, FHLMC, Wall Street firms and banks.
The use of below market interest rates, tax credits, grants to “non-profit” organizations for down payment assistance and in Arizona silent seconds (no interest, no payment, debt forgiven after 15 years) for 22% of the purchase price, have the effect for new home buyers of their overpaying for their homes and artificially increasing the value of real estate.
When the government’s money (our money, our children’s and grandchildren’s money) runs out, the undue stimulus and creative financing will finally be eliminated from the market leading to a sustainable lower value of real estate.
Will property values here in Phoenix rise or fall in 2010? I don’t pretend to know for sure – but if the Case Shiller model holds any weight, I wouldn’t bet the farm on them rising too much from their current levels anytime soon.
That said, the guys at Calculated Risk have an expanded analysis of this – not quite as nerve-wracking.