Wednesday, August 11, 2010

High Unemployment Rate Continues to Drive Down Home Prices: Where are All the Flipping Gurus Now?

I will be brief since flogging this dead horse has gotten boring.  Just follow the bouncing ball.


There will not be a recovery in the real estate market for investors until national income begins to grow again.


National income cannot grow until people return to work and, um, start earning income again.


High unemployment rates mean people are not earning income.


This means sellers will cut the prices of their homes because, get this, they need money.


They have been doing just that across the United States.  ONE QUARTER of sellers have cut the prices on their homes.  Read the article reprinted below.


When will the get-rich-quick creative real estate gurus admit they were wrong?  Where are the flipping property geniuses who promised America the secrets of instant wealth for $495 now?  Where are the foreclosure rescue fraud scammers who cheated some single mother or old person out of their home and its equity---only to see all the equity now gone?


As I have been CORRECTLY saying for years, we are looking at the worst possible economic option imaginable.


STAGFLATION.


Deflation in the real estate markets, Japanese style.


Inflation on many commodities, especially hard assets, as investors flee the dollar which today hit a FIFTEEN YEAR LOW against the yen and Euro.


So when will the get-rich-quick gurus admit they were wrong?


(Crickets chirping....)


Robert J. Abalos, Esq.


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Unemployment drives more home sellers to cut price

NEW YORK (Reuters) – Owners cut prices on one-quarter of U.S. homes listed for sale in July, a fourth straight monthly rise, as job market fallout trumped record low mortgage rates, real estate website Trulia.com said on Wednesday.
Sellers in the 50 largest cities slashed $30.1 billion from prices on houses on the market as of August 1, up from $27.3 billion in the prior month, San Francisco-based Trulia said in a report provided to Reuters before official release.
Unemployment near 10 percent, wage cuts, restrictive lending practices and home values that have fallen below their mortgage balances have left many potential buyers unable to take advantage of low rates.
"With one out of every four homes experiencing at least one price reduction, sellers are feeling no relief this summer in a market climate of fewer qualified buyers and widespread uncertainty about the job market," said Pete Flint, Trulia chief executive.
The average discount on homes reduced at least once held at 10 percent from the original asking price in July from June.
"If buyers are unqualified to buy, it doesn't matter how low interest rates are or how discounted a home is," Flint said in a statement, adding that the housing market will bounce around the bottom for months.
Unemployment remained at 9.5 percent in July but would have been higher if discouraged Americans had not dropped out of the workforce.
The housing market is still gaining equilibrium in the aftermath of up to $8,000 in buyer tax credits that ended on April 30. The credit forced sales into spring months at the expense of summer activity.
During the spring sales rush, sellers cut prices by much smaller amounts totaling $22.8 billion in March and $25 billion in April, according to Trulia.
U.S. 30-year mortgage rates averaged 4.56 percent in July, according to home funding company Freddie Mac, and have since drifted to a record low under 4.50 percent.
Nonetheless, in half of the 50 largest cities, sellers last month lowered prices on at least 30 percent of the homes for sale. Foreclosures continue to weigh on prices.
The real estate market will keep languishing until the job market recovers, said Trulia's Tara Nelson.
"Sellers need to continue to be very aggressive with pricing to compete against all the low-priced short sales and foreclosures that they'll be on the market with, for a long time to come," she said.
Minneapolis led in price cuts for a fourth straight month, with 42 percent of listings lowered at least once. The average discount was 9 percent for a total of $33.8 million in reductions, Trulia said, citing rising inventory and mounting competition.
Las Vegas had the biggest spike in the share of sellers cutting prices at 18 percent, a 56 percent surge, while New Yorkers cut prices on 20 percent of the listings, a 15 percent jump in the month.
Cities in California were among those with the largest increases in the share of sellers slicing prices.
Price-cutting on luxury homes listed at $2 million or more had an average discount of 14 percent from the original listing price, Trulia said. Homes in this category account for less than 2 percent of total inventory, but almost one-quarter of the total dollars slashed from asking prices.