Home prices to barely budge this year. How will your town do?
Re: Home prices to barely budge this year. How will your town do?
the 'tin foil hat' crowd would argue that the methodology used by CNN to come up with their regional home pricing forecasts VASTLY understate the consequences of tighter creditworthiness standards on would-be buyers who will not be able to obtain future financing even though they might have been willing to pay a high price for a house, ...
and also VASTLY understate the consequences of trillions of dollars worth of existing ARM mortgages whose interest rates and monthly payments are set to take a major upward jump in 2006 and 2007, which will probably result in large numbers of foreclosures and auction sales that will in turn rapidly depress real estate market prices.
Re: Home prices to barely budge this year. How will your town do?
The Chicago Tribune published a "nice" report on the over valuation of Illinois (and by implication Midwest) home prices not being much out of whack. Was December 2005 I think.
Basically showed that our values were about 5% out of whack compared with California, Arizona and Florida which were 20 to 35% out of whack. This is good news as it means
the worst that could happen is our home values might be flat but not begative.
What the Trib left out of the article was the companion article on the probability
of loss in the ability to pay home mortgages. This is a four letter word around here. J-O-B-S.
The midwest has the worst record of job creation in general, and Chicagos is about 1%
positive compared with AZ or FL which is 5 to 6% positive. Other midwest cities are negative on job creation since 2000. So our probability of home loan default is actually much higher. My guess is that older houses with conservative mortgage balances, and no home equity loans on them, will be fine in this area, as the values have not inflated up much.
Again I think 2006 is going to be a very interesting year economically. Any bets on gasoline
at $3.00 per gal. by end of June 2006? (Note I gave myself a one month pad of time)