Home prices drop in 45 metro areas

January 10, 2007

Home prices fell in at least 45 metropolitan areas in the third quarter as the real estate slowdown spread beyond industrial cities, where job losses have taking their toll on housing, to inflated markets in Florida, California and Arizona.
While the Detroit was the worst hit, with home prices falling almost 11% between July 1 and Sept. 30, the Sarasota, Fla., area was second with a 9% drop in the median single-family home price, according to data released Monday by the National Association of Realtors.

CHART: Metro area single-family home prices.

Five Florida metro areas were among the 10 regions with the biggest price declines in the third quarter, compared with the period last year. And in California, median prices fell in San Diego and Sacramento. (For a full list, go to www.usatoday.com/money)

The number of metro areas experiencing price depreciation jumped from 26 in the April-June period, and the number is expected to continue to rise for the next few quarters as sellers in more cities are forced to cut prices to woo buyers back into the market.

“When you see a large number of metro areas posting declines, that’s a big story. It tells you it’s a widespread phenomenon,” says Joel Naroff., president and chief economist of Naroff Economic Advisors.

But just as the real estate boom didn’t touch every housing market, the slowdown isn’t hitting every area. More than 100 metro areas posted prices increase last quarter, including 21 that had double-digit gains. Topping the list was Salem, Ore., where prices shot up 25%, followed by Elmira, N.Y., with a 19% gain, and Salt Lake City with 17%.

Most of the metro areas that have seen the deepest price declines this year are in Michigan, Ohio, Indiana and other areas that have suffered dramatic jobs losses in manufacturing. These are also areas where foreclosures are highest, and that depresses housing prices.

While buyers have great opportunities, they are afraid to buy a home now because of the job climate, says Mark Hull of Re/Max Realty Group in Detroit.

“And for sellers, it’s almost a nightmare,” he says. “A property can be marketed with every kind of tool you can think of, and unless there are really, really great incentives that make the property 20% below what the market price should be, they’re just sitting there.”

Sales of existing homes fell in 38 states during the third quarter, led by steep declines in Nevada, Arizona, Florida and California and Hawaii, the NAR figures showed.

Total existing home sales, including condos and town homes, fell 12.7% to a pace of 6.27 million. Sales fell in 38 states, led by declines in Nevada, Arizona, Florida, California and Hawaii. In nine states, sales were off more than 20% compared to the year-ago quarter.

The healthiest market for some sales was in North Carolina, followed by Texas and Montana.

Sales fell 38% in Nevada, 36% in Arizona; 34.2% in Florida and 28.6% in California.

The price survey showed that the median — or mid-point — price for an existing home sold in the third quarter dipped to $224,900, down 1.2% from a year earlier.

The plunge in housing shaved a full percentage-point off economic growth in the July-September quarter with economists predicting a similar reduction in this quarter.

But David Lereah, the Realtors’ chief economist, said he believes price declines in formerly red-hot areas of the country are setting the stage for a rebound next year.

“With the market in full transition, buyers now have choices and sellers are more willing to negotiate,” he said. “Under these circumstances, it’s no surprise that overall home prices are slightly below a year ago.”

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Warning: Pre-Payment Riders

July 12, 2006

It’s come to my attention that some of my clients are being hurt by the pre-payment penalty rider attached to their mortgage.

The loan officer promises you low or no closing costs, competitive rates, and good service. Pretty much anything it takes to get you to sign on the dotted line. However, they sneak into the small print a prepayment penalty that comes due immediately when you get rid of the mortgage for any reason. That includes refinancing and selling your home.

The prepayment penalty can be as low as $1,000.00 and as high as $10,000.00. In fact I’ve had two clients in the last six months in the $5,000.00 range. Meanwhile, your loan officer gets a sizeable kickback from the mortgage company for putting this clause into your mortgage. For example, he might get a $4,000.00 bonus for adding the clause that says if the mortgage is cancelled for any reason you have to pay a prepayment penalty.

There are so many alternative loan packages these days that many of our clients have chosen an Interest Only Loan, or an Adjustable Loan. Clients who’ve purchased these types of loans just last year are in some cases seeing a $500.00 a month increase in their mortgages. It’s no wonder they wanted to refinance. Imagine their surprise, after taking a hit in the pocket book for the last several months paying an additional $500.00 a month, and the loan officer says, “Ok we’ll put you into a new fixed loan but it’s going to cost you $7,000.00 in penalties just to get out of your old mortgage.”

Here’s how to protect yourself: Every loan officer must give you a “Federal Truth-In-Lending Disclosure Statement“. Click on the link to view the form. Scroll down and look for the YELLOW HIGHLIGHT. Put an “X” in the box that says “will not have to pay a penalty”. At closing clients are required to sign a separate form called the “Pre-Payment Rider”. If you do not want to subject yourself to a pre-payment penalty DO NOT SIGN the pre-payment rider.

In both cases I’ve experienced our clients have chosen lenders or friends in the business we’re not familiar with. We have a team of experts we work with and trust. My professional team of loan officers, attorneys, and home inspectors look out for your best interest. If you’re considering purchasing a home or refinancing let me know so I can hook you up with a reputable loan officer.

Filed Under Real Estate