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Are home prices leveling off in the worst-hit housing markets?

Posted by: Prashant Gopal on January 27, 2009

My story today on the latest S&P Case-Shiller 20-city home price index suggests that year-over-year home price drops in Miami, Phoenix, Las Vegas, San Diego, and other battered markets were leveling off in November.

That’s not all that encouraging since prices are dropping more than 30% in many of those markets. But sales are up as buyers take advantage of falling home prices and really low interest rates.

In Palm Beach County, where home prices have been tumbling faster than almost anywhere in the nation, prices dropped less than 1% in December from the previous month, the Palm Beach Post’s Real Time blog points out.

Reader Comments


February 6, 2009 2:17 PM

Marketproofing tips for home buyers!

1) It’s not about the deal!

Of course everyone wants to be able to obtain the best price on the purchase of their home or anything for that matter but what is most important is that a home buyer focuses on the true reason why they want or need the home to begin with. Good deals are great and I highly recommend that you, as a good steward of your money, negotiate the right price. Research and know what the right price is, but never let it be the final decision. What is most important is that it is the right home for you. Write a list of priorities of what you want in your home and stick to them; consider the future and where your life will be for you and your family or the eventual family you would like to have. It’s not always easy to sell a home so be prepared to live there for at least 3-5 years comfortably and be sure to plan accordingly. If you like the home --buy it. But make sure you do it for the right reasons not because it’s the best deal.

2) Know what you can afford!

All too often we become overzealous about our financial ability to afford something; this is especially true when it comes to purchasing a home. Speak to a bank and financial advisor prior to looking for your home and know your limits. For most, their home will be the biggest investment of their life, don’t lose it because of unforeseen events in your life. Save your money before purchasing, put down at least 20% and make sure your have an equal amount in savings for a life changing circumstance. The current market teaches us that nothing is gained by overextending your reach. Too many other families have lost everything due to market volatility combined with personal tragedy (job loss, death, sickness) simply because they were in homes they could not afford. Use the industry professionals around you to assist in guiding you to the right number for your purchase. Try to avoid looking at homes beyond your affordability range and be proud of what you have accomplished in order to be able to buy the home to begin with.

3) Know what your buying!

The old saying “buyer beware” could never be more true, especially when considering a home purchase. Do your homework. Know what your priorities are for your home and why. You can never research enough --especially in today’s age when information is so readily assessable. Know what will happen with that vacant lot across the street in the future and just how bad the water retention plant next door smells. It is your home, your largest investment and you are going to have to live there. Know the homes history especially any information which would materially affect the value now or in the future. It is your responsibility to know what you’re buying, not your realtors and certainly not the sellers to tell you. Find out why the seller is selling the home; sometimes the truth will surprise you. If you don’t plan on living there for a long period of time, consider the person who will likely buy the home after you and for what reasons.

4) Its not an investment, It’s a home.

All too often we justify our major decisions assuming it as an investment. It is true your home purchase will likely be your largest financial purchase; however, the real investment is into your family or lifestyle. Yes a home can appreciate but considering that from the year 1950 to the year 2000 homes on average annually appreciated .5% after inflation it is unlikely your home will turn you into the next Warren Buffet. The quick flip days are over; it was an artificial narrow spectrum of time that is now long gone and not so likely to return. Purchase your home with the intentions of happiness and fulfillment. The plausible scenario; you sell the home and get back all the money you have put in it plus the cost of your mortgage payments (better than renting!). Of course maintain the home properly and you just may be one of those who does experience a significant upside, but never enter into your relationship with the home with these intentions in mind.

5) Protect yourself and your equity!

You can bet that at the closing table all participants in your purchase bring with them some level of protection; the mortgage company, the seller, the title company and the realtor…you need to do the same. For years you have saved your money for that day when you too could live the American dream and buy a home. You did everything right, saved your money and have a 20% deposit, a good paying job, the house your buying is perfect and well within in your price range; life is good, then 3 years later the market tanks. You sit and watch your neighbors house, with the pool (which you don’t have) sit on the market for months before selling below what you paid for yours 3 years earlier, the news doesn’t let up about the real estate recession, foreclosure signs begin popping up around the neighborhood…now what? Equity protection products are readily available now in the market and it is strongly advised that all participate in them. For years mortgage companies have protected themselves with insurance for that inevitable market deterioration, why haven’t you? All markets are volatile and susceptible to decline, sometimes for the same reasons and other times for different reason. If one were to explore the past 30 years of any market they would discover extreme volatility and billions of dollars lost in equity. Priced between 1.5% and 3% of your homes value, it is a small price for big security. It is not about whether markets are volatile; we all know they are, it is a matter of where the market will be when you need or want to sell your home and how much you could lose.

Catherine Bartosevich | Account Executive | The Dowd Agency
28 West 44th Street | Suite 720| New York, NY 10036
P (212) 686-7777 | F (212) 686-6439 | | aim: CatBartosevich

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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