NOW it’s starting – but only starting. This kind of news will shake up sellers and wake up buyers. Home price drop is largest in 35 years,
The median price of a new home plunged in September by the largest amount in more than 35 years, even as the pace of sales rebounded for a second month.
The Commerce Department reported that the median price for a new home sold in September was $217,100, a drop of 9.7 percent from September 2005.
… The weakness in new home prices was even sharper than a 2.5 percent fall in the price of existing homes last month, which had been the biggest drop on record. [emphasis added]
OK, think about this. You read that prices are now falling at about 10% a year nationally. Who would be dumb enough to borrow $150,000 or so to buy a house that will be worth, on average, $20,000 less a year from now? Right.
If you own a house in the SF Bay Area you just lost, on average, maybe $60,000. If you are thinking about buying a house here you are thinking about borrowing half a million dollars or more to buy in a market where you face $60,000 yearly losses. Nope, not gonna do it.
So you can see what is about to happen. Buyers are going to wait. (Well, the smarter ones are…) And sellers are going to worry that they’d better drop prices enough to sell before it gets even worse.
And then there’s all the people with “creative” mortgages with payments that are about to double.