The Case-Shiller Index just published a report illustrating that the housing market has entered into the double dip scenario with 17 of 20 metropolitan areas reporting a decline in home prices after a brief upswing.
Since the height of the market, it is estimated that home prices in Phoenix have fallen at least 50 percent.
So what does the future hold for housing prices? It depends on which economist you listen to.
It is hard to recall an economist who forecasted the falling stock market or the severe decline in housing prices. For that matter, it is hard to recall an economist who predicted that the Dow Jones Industrial Average would close above 12,000 in January of 2011.
Can you remember February and March of 2009? There was doom and gloom in the stock market. Those talking around the water cooler shared many doubts if anyone’s 401K plan would ever recover. Few people were buying and a lot were selling to salvage what they had. The Dow Jones average was in the 7,000 range.
If you were brave enough to invest in some companies then, look at the difference in price per share vs. today.
February-March 2009 Today
Wells Fargo $8.94 $31.99
General Electric $6.52 $20.04
Boeing $29.05 $70.05
Bank of America $3.12 $14.54
Ford Motor Co. $1.72 $18.00
So the stock market rebounded dramatically in less than two years.
There is no doubt that real estate has taken the biggest hit and has caused the most heartache. Unfortunately, strategic defaults on properties are helping to perpetuate the decline in housing values.
By some estimations, 25 percent of those homes that have been foreclosed upon, were not because the owner had to walk away, but because they chose to walk away. This is certainly a factor in prolonging the slump.
Moving on, the $64,000 question is, (actually the price of the question has fallen to $32,000 but is expected to rebound) can the housing market rebound faster than expected? The stock market did. And again by some estimations, we may face a housing shortage in the future.
Just as stocks were priced below their asset values in 2007, home prices today are priced below their asset values. Will the people who buy real estate today, be looked at as being as smart as those who bought into the stock market less than two years ago?
Ray Pugel is a designated broker for Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.