New York Times: “Home prices seem far from bottom”
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Worth reading this morning: this New York Times piece arguing that the American housing market ‘is far from hitting bottom.’ The story says housing prices are likely to fall ‘through late 2009’ and possibly longer. Highlights:
Adding to the worries nationwide are rising unemployment, falling wages and escalating mortgage rates — all of which will reduce the already diminished pool of would-be buyers. “The No. 1 thing that drives housing values is incomes,†said Todd Sinai, an associate professor of real estate at the Wharton School at the University of Pennsylvania. “When incomes fall, demand for housing falls.â€
The story notes the recent spike in mortgage rates: ‘... the average rate for 30-year fixed rate mortgages was 6.75 percent, up from 6.06 percent last week.’ It also points out that prices are still expensive relative to rents in many bubble areas:
In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody’s Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents.
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-- Peter Viles