From this article...
A government report Monday showed that new-home sales posted a modest rebound in September, but some Wall Street analysts are bracing for more price deterioration in the housing market as a result of escalating foreclosures.
Fox-Pitt Kelton housing analyst Robert Stevenson on Monday increased his forecast for home-price declines, saying foreclosures are driving down pricing faster than he had expected.
"Our original expectation that home prices had another 15% to fall appears far too conservative," Stevenson wrote in a report to clients.
His base-case assumption is now an additional decline in the range of 20% to 25%.
The formula is rather simple... more inventory (supply) equals more concession (in the form of a lower and more affordable price for the buyer). The banks that own the foreclosed properties understand this formula quite well and that is why we see as many sales for REO properties as we do sales made by actual owners. The banks have the ability to put more downward pressure on the prices in the current market.
Month after month, the banks have rolled out more units to the market and have been very successful in moving their inventory as compared to the more conventional sellers have. The only reason for this is price. Banks are at least speaking the language that buyers understand.
There is another wave of foreclosures due to hit the market next calendar year, so this isn't quite over yet.
Sellers, if you want to attract buyers then you are going to have to make your asking price attractive... it is that simple.
Buyers, you have all the negotiating power you need... plus you still have many great opportunities to rent for a lower monthly cost than to purchase (for the time being as long as you are putting most of that savings away for a down payment later).
Now if I can comment about how local politics has played a role in all this here in Kingman for a second... remember that not all local markets are the same. Kingman was a hot spot for new investment activity just a couple of short years ago. Then the stories started coming out about how hard and costly it was to develop opportunities in Kingman as compared to other areas (including outside the city limits). Couple that with a rebellion of sorts against new development led by the main media presence in the area that featured a group of NIMBY citizens telling us all that Kingman is big enough for their liking. Obviously people that didn't need more opportunity because they were either already retired or simply wanted to keep other interests out of the community so they could reserve all of the opportunity for themselves (with the expectation that the citizens of Kingman would help them along the way).
Now our market is soft and with the layoffs and other folks with businesses suffering... the market will only get softer. There is no doubt that the community listened to the wrong people who didn't have the communities best interest at heart. Instead of being business and investment friendly, the community flipped the bird to those kinds of interests... and those interests have moved on to other places.
The hole only gets deeper, especially if the only effort to do something different is coming from the federal government (yuck). This is way more than 'impact fees'. An attitude adjustment is called for more than anything. The city needs to commit to a better business environment starting with developers with the resources to spend here locally (the type that will hire, invest, and create opportunity throughout the community).
Okay... political rant off.
Besides... one more win and my team earns a title. Go Phillies!!
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