According to the real estate blog Zillow, "median home values, as measured by the Zillow Home Value Index, fell 3 percent during the first three months of the year ... [and] with values falling by about 1 percent per month ... [Zillow] believe[s] a bottom will come in 2012, at the earliest." Even more sobering is their report that "by the end of the first quarter, 28.4 percent of single-family homeowners with mortgages were underwater, up from 27 percent in the fourth quarter of 2010."
Yesterday's WSJ claims "Prices are decelerating in large part because the many foreclosed properties that often sell at a discount force other sellers to lower their prices." Additionally, "The widely followed Case-Shiller index published by Standard & Poor's showed that prices climbed from April 2009 until last summer, when they started declining as tax credits expired." The ill conceived tax credit incentive also caused further havoc with the housing market. According to Zillow and The Journal, "When the tax credit went away, markets were left with rising supply from foreclosures but with less demand from buyers."
So if you can't afford to take advantage of record low mortgage rates and falling home prices, maybe you'd like to buy that new grad in the family a used car. It won't be a bargain. The WSJ also reported this week that recession production cutbacks and supply chain disruptions from Japan "have made used vehicles a hot commodity as dealers dive into the depleted pool for cars to fill their lots ... add[ing] $1,500 to $3,000 to the price of some used cars just in the last six months..." And while "the prices of used vehicles will continue to soar as inventories of lower-priced and economy cars shrink ... U.S. dealers say they expect to exhaust existing inventories and face severe shortages of new Japanese cars by July."
Maybe it's just not a wise time for family spending, but the news isn't all bad. Recent escalation in gasoline prices is rumored to drop by as much as a buck/gallon over the next 45 days due to falling demand.
- William Busch